Latest developments and themes in the US economy
Key Takeaways:
- Core CPI likely edged up in May. Core consumer prices probably accelerated slightly, with an estimated 0.255% month-over-month increase, signaling some inflation pressure remains.
- Tariffs’ impact on core goods prices remains limited but price pressures could intensify in the near term. Core PCE inflation is expected to rebound stronger, driven mainly by non-market services (up ~0.367% m-o-m).
- Employment report mixed: Headline job gains modestly exceeded expectations but downward revisions and rising job losses in the household survey raise downside risks for employment growth.
- Economic slowdown signs persist: Soft indicators like ISM manufacturing and services surveys declined, and the Fed’s Beige Book reported weakening conditions.
- Monetary policy outlook: Increased downside risks to growth and an earlier-than-expected inflation shock suggest the Fed may implement three consecutive rate cuts from December 2025 through March 2026.
- Looking ahead: Hard economic data will likely show clearer signs of slowing momentum in the coming months.
