"June’s big inflation number will ramp up scrutiny of price-related data as policymakers assess whether the economy is at greater risk of overheating."
The headline CPI index rose 5% in May, marking the highest growth rate since August 2008.
The largest gain in the CPI in nearly 12 years reflects in part the comparison to extremely weak inflation a year ago amid pandemic lockdowns.
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.
