Insights 
VT 
In May, the US Producer Price Index (PPI) increased by 2.6% year-on-year, matching expectations. The previous figure was revised from 2.4% to 2.5%. The PPI rose by 0.1% month-on-month, compared to the expected 0.2%. The prior month-on-month data was revised from a decline of 0.5% to 0.2%.
Excluding food and energy, the PPI rose by 3.0% year-on-year, just below the anticipated 3.1%. On a monthly basis, it increased by 0.1%, whereas a 0.3% rise was expected. Stripping out food, energy, and trade, the index grew by 2.7% compared to the previous 2.9%. Monthly, this measure rose by 0.1%, improving from a prior decrease of 0.1%.
Inflation Trends
The slight softness in these figures does not notably cool inflation pressures and comes as initial jobless claims data is released simultaneously. The US dollar has weakened amid these developments. The Federal Reserve faces pressure to adjust interest rates, though current inflation measures remain above the 2% target and previous averages.
These figures, in simple terms, suggest that producer prices are rising more slowly than some had hoped but not by much. The annual increase sits within the expected range, while monthly changes came in under estimates. Meanwhile, previous readings were adjusted upward, hinting that prior optimism was a touch premature. Inflation, in this context, is proving to be moderately sticky.
When you strip out the more volatile components like food and energy, what’s left reveals a trend that’s still above comfort levels. The slowdown, while present on the surface, lacks enough depth to shift broader expectations. Moreover, the modest month-on-month moves—particularly for core measures—reflect restrained improvement, rather than a push towards stability.
Impacts on Monetary Policy
Simultaneously, we’ve observed a slight uptick in jobless claims. That small shift, while not dramatic on its own, could complicate the overall picture further if it continues. Combined with downward pressure on the dollar, this starts to influence how markets weigh future policy action. The dollar’s softness isn’t surprising given inflation isn’t cooling fast enough and hopes for imminent rate changes may now need to cool as well.
Powell and his colleagues are therefore keeping one foot on the brake. The numbers don’t give them breathing space to begin easing yet, even if some would like to see that. Until there’s a more convincing drop in price pressures—particularly those beyond food and fuel—their hand looks forced.
For those of us navigating rate-sensitive strategies, the message is reasonably straight. We’re heading into a window of cautious adjustments rather than bold shifts. Positioning needs to factor in the weight of revised data and expectations being slightly ahead of reality. Volatility might not rise sharply, but it’s unlikely to fade away either.
The revised declines from earlier months that turned into lighter increases suggest short-term disinflationary progress was overstated. That’s a cue to trim down premature bets on rapid policy changes. Margins will depend on timing and precision, not on chasing either end of the trend.
Finally, we watch for further pressure points across the labour market and consumer data. These quiet levers could move the bigger gears. Let’s not forget that the Committee doesn’t look at headline figures in isolation—they’ll want repeated proof before acting. This means reactions should be tempered and focused more on adjustments than overhauls.
