US CPI Preview: Prices Are on the Rise
US CPI Preview: Prices Are on the Rise
By:Ilya Spivak
Stocks and the dollar are at risk as US inflation data puts interest rate cuts out of reach
- US CPI data is expected to put inflation at the highest in three months.
- Leading indicators warn of reflation risk, which will delay Fed interest rate cuts.
- Stocks and the dollar may fall as markets speculate on catch-up easing.
Financial markets are treading water amid a lull in trading activity. Futures tracking the bellwether S&P 500 stock index on Monday posted their lowest volume day since Jan. 9. A similar lull appeared in 30-year Treasury bond futures. The spotlight now turns to US inflation data for a catalyst to break the deadlock.
The May edition of US consumer price index (CPI) figures is expected to show headline inflation accelerated to 2.5% year-on-year, up from 2.3% in April. Perhaps most importantly, the core measure excluding volatile food and energy prices – the focus for Federal Reserve officials – is seen rising to 2.9%, the highest in three months.
US inflation data to show prices are going up again
Traders were heartened to see a relatively “normal” set of CPI figures in April, easing concerns about an inflationary spike amid the ratcheting up of tariffs by the Trump administration. However, subsequent producer price index (PPI) data revealed this was because businesses shielded consumers by absorbing higher input costs.
.png?format=pjpg&auto=webp&quality=50&width=759&disable=upscale)
Since then, purchasing managers index (PMI) surveys from S&P Global and the Institute for Supply Management (ISM) have pointed to rising prices in the pipeline. Perhaps most strikingly, the latter figures revealed the fastest service sector price growth since November 2022.
Over the past decade, this metric has tended to lag headline inflation data – both CPI and the personal consumption expenditure (PCE) gauge preferred by the Fed – by approximately two months. That seems to anticipate reflation in the months ahead.
Markets hoping for Fed rate cuts may struggle with warm CPI results
Whether this appears in this week’s data or not, it certainly seems to reinforce the sense that the US central bank will not be moved to cut interest rates any faster. As it stands, at least one 25-basis-point (bps) cut is priced in by October. The probability of a second before the end of the year stands at 56%.
Meanwhile, the markets seem to be convinced economic growth and not inflation ought to be the focus for policymakers. Inflation expectations priced into bond markets – so-called “breakeven rates” – have trended convincingly lower since the beginning of the year. That suggests recessionary forces are seen overwhelming reflation risk.
With that in mind, CPI data that gives the Fed another reason to remain on the sidelines may dent appetite for risk. Stocks are at risk in this scenario. At the same time, gold prices may rise alongside bonds at the long of the yield curve while the US dollar weakens as speculators position rate cut delay now translating to sharper catch-up easing later.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts #Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
For live daily programming, market news and commentary, visit #tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2025 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.