Softer US inflation, but the energy squeeze on spending power is becoming obvious

Softer US inflation, but the energy squeeze on spending power is becoming obvious

US Inflation details ease concerns of energy spillover effects

Rates Spark: Watch inflation expectations drift higher

US Inflation details ease concerns of energy spillover effects

The current commentary indicates a lessening of inflation concerns in the U.S. as core inflation showed unexpected resilience despite a spike in gasoline prices impacting the headline figures. Per the full note from ING, while headline inflation increased 0.5% month-on-month in May, the core inflation rate was softer than anticipated at 0.2% month-on-month, suggesting that underlying price pressures may not be as acute as previously feared. This divergence has led to a subtle shift in Fed rate hike expectations, with the probability of a 25 basis point increase by 2026 slightly diminished. Overall, this easing inflation narrative may support a more stable outlook for the USD against other currencies in the near term, especially as gasoline prices are expected to moderate in the coming months.