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What Wall Street is saying about May's shocking inflation report

 2 years ago
source link: https://finance.yahoo.com/news/heres-what-economists-are-saying-about-mays-shocking-inflation-data-160403301.html?_tsrc=fin-notif
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What Wall Street is saying about May's shocking inflation report

Sat, June 11, 2022, 1:04 AM·7 min read

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.”


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