**As seen in Risk In The Week report 07/08/2022, subscribe at cablefxm.co.uk/reports
*Bloomberg forecast range from 8.1% to 8.9%
May consumer prices recorded at 8.6% Y/Y, this was faster than the previous and above market expectations of 8.3%. The core figure accelerated to 6.0% Y/Y, this was above the estimate of 5.9%, on a monthly basis, CPI came at 1.0%. The release topped the highest forecast in the range, with fuel oil and gasoline among the leaders, energy ticked at +3.9% on the month. Food prices accelerated by 1.2% M/M, this was the fastest pace recorded this year. New vehicles and used cars recorded a 1.0% and 1.8% M/M rise, respectively, the latter expanded at the fastest pace since December. The report also showed grocery prices printing at the highest pace since 1979. Airfares recorded the largest increase since 1980 at a 37.8% Y/Y. Food at home saw a rise of 11.9% Y/Y, the highest since 1979. Unexpectedly, the Fed did not wait for the Core PCE Price Index which was released about three weeks later, and decided to hike interest rates by 75bps during the meeting following this print. Energy components have been closely followed as the rise in broad commodity prices has contributed dramatically to the acceleration in prices. However, June saw crude oil futures drop 7.77%, gasoline futures fall 10.55%, and natural gas futures decline 33.41%, this could bring some easing in the headline number, the month-over-month figure will be in focus. Analysts at CIBC note that base effects are not helping the core figure anymore, they say the figure could re- accelerate temporarily over the next months on the back of higher shelter costs. CIBC sees the CPI figure confirming a 75bps rate hike from the Fed in July, however, they expect the pace to slowdown as real incomes erode due to high consumer prices, they note that the real estate and construction sectors are cooling down.
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