May 2024 CPI Estimate
Tomorrow at 8:30 am ET we will get the long-awaited May CPI. Normally, CPI is the most important print in any month but this month it will be even more important because it goes out on the 2nd day of the Fed meeting, meaning it could determine the tone of the Fed meeting.
So far in 2024 CPI hasn’t been all that great. In Q1 CPI was hotter than expected and in Apr it came in line with expectations. Q1 this year came after quite tame reads in Q4 2023. On average, headline CPI in the first 4 months of 2024 printed +0.2 pp above its Q4 2024 MoM figures.
On average, core CPI in the first 4 months of 2024 printed +0.1 pp above Q4 MoM figures.
My average error for estimating headline CPI remains extremely low at -2 bps.
My average error for estimating core CPI is also quite low at -3 bps.
For public links to my prior month CPI estimates go to ArkominaResearch.com.
The market is currently divided between expecting a first cut in Sep and Nov. A hotter CPI print could push expectations further out, while a cooler print could even bring them forward so everyone is impatient to learn what happened with CPI in May.
My CPI estimates are…
Headline CPI
+0.1% MoM (in line with both consensus and Cleveland Fed) and +3.3% YoY (-0.1 lower than both consensus and Cleveland Fed)
Core CPI
+0.2% MoM (-0.1 pp lower than both consensus and Cleveland) and +3.5% YoY (in line with consensus while it is either in line or -0.1 pp lower than Cleveland Fed as it is unclear whether 3.55% is 3.5% or 3.6%)
My unrounded estimates:
If CPI comes as I expect, this will likely not make the Fed cut rates immediately but it could result with an overall dovish tone of the Fed meeting and Powell’s press conference tomorrow.
If you’re interested in learning more what the Fed will likely do this year, when they may start cutting rates and why consider subscribing to Marko’s Fed Report which is a detailed macroeconomic analysis of the Fed, economy and PCE inflation that, among other things, contains:
A detailed analysis of the economy and which type of landing are we in
An analysis of the monetary policy lags
What will the Fed likely do in the remainder of 2024
PCE inflation (headline and core) trajectory for 2024
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