From our colleagues at our sister company, Argent Trust:
Announced this morning, the Consumer Price Index increased 0.1% in May, as expected and three-tenths lower than the previous month. It grew 4.0% on an annual basis, retreating from the 4.9% annual level the previous month. Monthly prices for Used Cars and Trucks, up 4.4%, were relatively strong, while monthly prices for Fuel Oil, down -7.7%, and Gasoline, down -5.6%, were relatively weak. The core rate, which excludes prices for food and energy, increased 0.4% in May, as expected and the same as the previous month. It increased 5.3% on an annual basis, slightly more than expected but lower than the annual level the previous month.
Overall, inflation measures came in primarily as expected, with the headline number almost flat and the core increasing at the same pace as the previous month. Inflation remains on a downward trend but is still elevated. The Federal Reserve is likely coming to the end of the initial rate increase process, but they are continuing to reduce their balance sheet in the background. In addition, credit conditions are becoming more difficult as banks appear reticent to lend given an inverted yield curve and stress is emerging in the commercial real estate sector. How long consumers and the economy can hold up amidst these tightening conditions will be key for the markets in the coming weeks.
In all, the 10-year US treasury yield is lower following the report and equity futures are higher as we head into the market open.
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