Inflation continued to surge in May, increasing at the quickest pace in 40 years as consumers face rising challenges at the gas station and grocery store.
The Consumer Price Index (CPI) published Friday by the Bureau of Labor Statistics rose 8.6% from a year ago, up from April's reading of 8.3% and higher than economists had projected.
Federal Reserve policymakers tasked with bringing prices back down to earth are likely to take cues from May’s CPI report on how aggressively they need to raise interest rates to mitigate inflation that shows no signs of abating.
Wall Street reactions came in fast and furious after the data, and Yahoo Finance rounded up some of what we got in our inbox below:
Brian Coulton, Chief Economist, Fitch Ratings
Coulton, chief economist at Fitch Ratings, says the May figures are the "clearest sign we have of inflation broadening and starting to becoming embedded."
"While the pick-up in the headline CPI inflation rate to 8.6% y/y from 8.3% y/y in April was all explained by food and energy, the striking aspect was the continued strength in core inflation on a month-on-month basis (at 0.6%). Core goods inflation picked up sharply on a month-on-month basis as car prices started to rise again – this may speak to a re-intensification of global supply-chain pressures. And services inflation just keeps heading north driven by rents (shelter costs) – this is probably the clearest sign we have of inflation broadening and starting to becoming embedded and something the Fed cannot ignore."
Aditya Bhave, US and Global Economist, and Meghan Swiber, Rates Strategist, Bank of America
Bhave, an economist at Bank of America, and Swiber, a rates strategist pointed out that all major components of the report increased last month:
“Stepping back, we are struck by the fact that there were almost no pockets of weakness in this report. The data are consistent with our view that inflation is no longer just a function of goods supply-chain disruptions. Inflation is also being driven by strong consumer demand because of a red hot labor market and strong wage inflation. Accordingly, inflation has become embedded in the more cyclical service sectors as well.”
Charlie Ripley, Senior Investment Strategist, Allianz Investment Management
Ripley, senior investment strategist at Allianz points out that Federal Reserve officials are likely to ramp up interest rates more aggressively than anticipated after Friday's print.
“While many market participants were looking for inflation pressures to begin to cool, the latest CPI continues to show the opposite. Many Americans are feeling the pain with headline CPI rising to a four-decade high of 8.6%. From a Fed perspective, the chase continues, and more aggressive Fed measures will likely be needed to catch up to runaway inflation. Whether this translates to more aggressive hikes this summer, or a continuation of 50 basis point hikes this fall is the option for the Fed, but the overall reality for the Fed is that inflation is not under control, and they have their work cut out for them in the coming months.”
Ben Ayers, Senior Economist, Nationwide
“There was nowhere to hide from higher prices in May. With consumer inflation at another 40+ year high, it is clear that inflationary pressure is not fading and may be gathering steam in response to repeated global supply shocks. The initial interest rate hikes by the Fed this spring have done little to slow down the inflation train so far, but further sharp tightening should be coming soon.”
Greg Daco, Chief Economist, EY-Parthenon
Daco, chief economist at EY-Parthenon, indicated that as inflationary pressures persist and the labor market shows signs of slowing, stagflation — an economic condition in which the growth rate slows and inflation remains high — could be on the table for next year.
"Should we fear stagflation? No, not in 2022, but the risks will be much greater in 2023. In the face of lingering inflation, rising interest rates and slower global activity, US businesses will likely curb hiring and small businesses will be on the forefront of this slowdown. Encouragingly though, the US economy and the labor market are entering this economic slowdown from a robust position, and companies are looking to build resilience in the face of global economic and geopolitical uncertainty. This will likely mean retaining strong talent, instead of proceeding with severe layoffs."
Nancy Davis, founder of Quadratic Capital Management
Davis, founder of Quadratic Capital Management, offered an even sterner warning on stagflation:
"Stagflation risk is real and we may already be there. Inflation is running hot and the last GDP print was negative. To some, our economy may feel very much like we have stagflation, with higher prices and slowing consumer confidence. One can easily draw a scenario where supply shocks continue to push inflation higher despite a hawkish Federal Reserve tightening monetary policy."
Jeffrey Roach, Chief Economist, LPL Financial
"The fact that the dollar is gaining on the news means that investors are looking for safe havens and market volatility will likely continue."
"The CPI does not go into the Fed matrix for policy. The core PCE deflator, which accounts for substitution effects, is the important metric. However, the odds of a 50 basis point hike in July are looking more likely. Of course, the Fed is expected to hike by 50 basis points next week."
Ian Shepherdson, Chief Economist, Pantheon Macro
"This report kills any last vestiges of hope that the Fed could pivot to [a 25 basis point hike] in July, but we remain hopeful for September, on the grounds that the next two core CPI prints will be lower than May’s; the three jobs reports will show that wage gains continue to moderate; and because by the time of the September meeting, the housing meltdown will have everyone’s attention, and continuing to hike by 50bp will look gratuitous."
Seema Shah, Chief Strategist, Principal Global Investors
"What an ugly CPI print. Not only was it higher than expected on almost all fronts, pressures were clearly evident in the stickier parts of the market. The decline in inflation – whenever that finally happens – will be painfully slow. The Fed's price stability resolve is going to be really tested now. Policy rate hikes will need to relentlessly aggressive until inflation finally starts to fade, even if the economy is struggling. Any chance of a Fed put, already very low, has been "put" firmly to bed."
Bill Adams, Chief Economist, Comerica Bank
"Higher than expected inflation in May is also bad for the growth outlook. The longer inflation stays high, the faster the Fed will raise rates, and the larger the headwind to growth will be. Equity market futures are broadly lower on Friday morning, anticipating larger downside risk to the economic outlook from falling inflation-adjusted incomes and faster interest rate hikes."
Ron Temple, Head of U.S. Equities, Lazard Asset Management
"If the Fed had any doubt about the need for additional substantial rate hikes, they should be dispelled by this report. Accelerating shelter inflation in particular should raise a bright red flag. Housing is the single largest expense for consumers, and it’s the stickiest, often entailing a 1-2 year lease. As home purchase prices have rocketed, renters have little choice other than to accept steep rent increases. Consumers know these cost increases will not reverse, fueling demands for higher wages to make ends meet. With labor markets the tightest in decades, employers have little choice other than to raise compensation, which in turn contributes to increasing services inflation. The Fed faces a mighty challenge breaking this potential wage-price spiral."

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Instagram, YouTube, Facebook, Flipboard, and LinkedIn
U.S. consumer prices accelerated in May to the highest since 1981, as Americans grapple with a surge in the cost of gas, food, and shelter, data showed Friday.
RSM chief economist Joe Brusuelas joins Yahoo Finance Live to discuss Friday's CPI print, the path of Fed rate hikes, the outlook for inflation, and how investors should set expectations.
U.S. stocks sank Friday morning as investors digested an update on inflation, which showed price increases unexpectedly accelerated and jumped by the most since 1981.
Greenlight Capital’s David Einhorn sees only one way to fix the high inflation that has rocked the U.S. this year: more inflation. "Prices will have to go much higher."
(Reuters) -Electric vehicle maker Tesla Inc on Friday proposed a three-to-one stock split, making its shares more affordable following recent sell-offs of the most valuable automaker. The company also said Oracle Corp co-founder Larry Ellison, a friend of Tesla Chief Executive Officer Elon Musk, will not stand for re-election to Tesla's board when his term ends at this year's shareholder meeting. Ellison is among the top investors who have promised funding toward Musk's $44 billion acquisition of social media firm Twitter Inc.
Gas prices topped $5 a gallon nationwide as of Saturday, according to the latest price data from AAA, and the sharp rise in recent months is not showing signs of slowing.
U.S. stocks sank Friday as investors digested two downbeat prints on the U.S. economy.
Rising costs suggest that Interest rates are too low. Part of the problem is that many of the central bank’s expectations are increasingly at odds with market and public sentiment.
(Bloomberg) — Former Treasury Secretary Lawrence Summers said the Federal Reserve has failed to account for its mistakes and to realize the damage to its credibility after the latest inflation data dashed hopes that a peak had been reached.Most Read from BloombergUS Lifts Covid-19 Test Requirement for International TravelUS Inflation Quickens to 40-Year High, Pressuring Fed and BidenGen Z, Millennials and Gen X All Basically Agree on WFHTrump’s Air Force One Deal Pains the Pentagon, Not Just Bo
The stock market fell sharply Friday as the inflation rate in May hit the highest level in 40 years. Tech and financials led the downturn.
Photo Illustration by The Daily Beast/Photos by NDN Collective/YouTubeThe story of a Rapid City, S.D., hotel embroiled in racial tension took a bizarre twist this week, followed by another one on Saturday.The Grand Gateway Hotel became the center of drama in March when the owner issued a racist tweet following a murder at the hotel. That led to ongoing protests at the hotel, and criticism from local officials.On Monday, June 6, Judson Uhre filed a lawsuit in Pennington County against his mother
Pope Francis canceled a planned July trip to Africa on doctors' orders because of ongoing knee problems, the Vatican said Friday, raising further questions about the health and mobility problems of the 85-year-old pontiff. The Vatican said the July 2-7 trip to Congo and South Sudan would be rescheduled “to a later date to be determined.” “At the request of his doctors, and in order not to jeopardize the results of the therapy that he is undergoing for his knee, the Holy Father has been forced to postpone, with regret, his Apostolic Journey to the Democratic Republic of Congo and to South Sudan,” the Vatican said in a statement.
The United States late Friday rescinded a 17-month-old requirement that people arriving in the country by air test negative for COVID-19, a move that follows intense lobbying by airlines and the travel industry. Centers for Disease Control and Prevention (CDC) Director Rochelle Walensky issued a four-page order https://www.cdc.gov/quarantine/pdf/rescission-global-testing-order-p.pdf.pdf lifting the mandate, effective at 12:01 a.m. ET (0400 GMT) Sunday, saying it is "not currently necessary." The requirement had been one of the last major U.S. COVID-19 travel requirements.
For the second time in three years, Tesla will split its stock, lowering its price and increasing the number of shares outstanding.
(Bloomberg) — When the nineties ended, an overvalued stock market took three long years to rid itself of its accumulated excess in what is now known as the dot-com crash.Most Read from BloombergUS Lifts Covid-19 Test Requirement for International TravelUS Inflation Quickens to 40-Year High, Pressuring Fed and BidenGen Z, Millennials and Gen X All Basically Agree on WFHTrump’s Air Force One Deal Pains the Pentagon, Not Just BoeingEating Two Portions of Fish Per Week Linked to Deadly Skin CancerT
The long stretch of historically low interest rates may have benefited real estate more than any other sector. Cheap debt has a direct impact on cash flow, which means more capital to grow and more cash to distribute to shareholders. The flip side is that low interest rates resulted in record-high inflation. The consumer price index unexpectedly hit an 8.6% annual increase in May, after April's 8.3% rise left most investors believing inflation was starting to cool off. While the entire real esta
(Bloomberg) — US stocks tumbled the most in three weeks and Treasury yields spiked higher after an unexpectedly hot reading in consumer prices fueled bets the Federal Reserve will have to step up its battle against inflation.Most Read from BloombergUS Lifts Covid-19 Test Requirement for International TravelUS Inflation Quickens to 40-Year High, Pressuring Fed and BidenGen Z, Millennials and Gen X All Basically Agree on WFHTrump’s Air Force One Deal Pains the Pentagon, Not Just BoeingEating Two
Former FDIC Chair Sheila Bair writes that was refreshing that in a recent CNN interview, Janet Yellen, the first female U.S. Treasury Secretary, said that she had been wrong in her early predictions that inflation would be transitory.
Former GE CEO Jack Welch left a management legacy that permeates the top ranks of corporate America to this day.
The rate of U.S. inflation reached a 40-year high of 8.6% in May as overall prices for things including rent, gas and food all remain on the rise. “I personally believe that this inflation is here to stay for quite some time,” Orman recently told CNBC, prior to the release of May’s CPI data from the U.S. Bureau of Labor Statistics. The first is a fixed rate when the purchaser buys the bond, and the second is the inflation adjustment rate, which is reset every six months based on inflation.

source

Lascia un commento

Il tuo indirizzo email non sarà pubblicato. I campi obbligatori sono contrassegnati *