Core inflation rose 0.6% last month, the largest gain since January 1991, as the disinflationary impact of the coronavirus continued to wear off.
“Deflation is likely to take hold over the next few months as businesses slash prices in response to much lower demand from the coronavirus outbreak."
The pick-up in underlying inflation in June "argues against aggressive monetary stimulus from the central bank," an economist says.
The Fed will view the first decline in the CPI since March as "further proof that price pressures are building more slowly than some have feared."
"The inflation picture is still fairly tame, certainly not heating up enough to push the Fed to a more aggressive stance."
Inflation continued its "slow but steady" climb in May as Fed policymakers gear up for another hike in interest rates.
"We expect a continued rise in inflation to prompt Fed officials to raise rates four times in total this year,” one economist says.
Inflation appears to have "re-emerged after a long period of dormancy," fueling fears that the Fed will raise interest rates more aggressively this year.
Last month's CPI data "was very muted and not something which the Fed is going to be happy to look it," a market analyst says.
"It is getting harder for the Fed to continue claiming that this is a temporary drop-off," an economist says.
The April increase matched economists' expectations and suggests the March decline was "an aberration."
Fed Chair Janet Yellen says the firmer pace of inflation has "strengthened" the case for an interest rate hike next month.
