U.S. headline consumer price index rises sequentially in May

The U.S. headline consumer price index rose in line with market expectations. The headline inflation rose 0.2 percent sequentially in May, and rose 2.8 percent on a year-on-year basis. The main forces driving inflation higher were gasoline and shelter that recorded a rise of 1.7 percent and 0.3 percent, respectively on a sequential basis. In the meantime, food prices came in flat in the month.

Core inflation rose 0.2 percent in the month, also consistent with expectations. This lifted the year-on-year rate to 2.2 percent, up from 2.1 percent in April. Stronger prices for core services, which came in at 0.3 percent sequentially, mainly drove the rise, as core goods prices continued to be a drag. Inflation for core services is now back up at 3 percent year-on-year, close to the rate of inflation before idiosyncratic price declines hit services inflation.

Looking into details, prices rose for all types of shelter. Prices also rose for medical care, new vehicles and motor vehicle insurance.

Core inflation is expected to continue to rise in the quarters ahead as a solid economy and wage pressures see price hikes percolate through the economy, stated TD Economics in a research report.

“A 25-basis point hike at tomorrow's FOMC meeting looked like a done deal even before the May inflation report. All eyes will be on the Fed's updated economic outlook released alongside the statement”, added TD Economics.

At 13:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 19.5732. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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