CPI Surprises at Unchanged


Stock index futures were slightly higher in the overnight trade. However, there were substantial follow-through gains when the May U.S. consumer price index report was released.

The CPI was unchanged when an increase of 0.1% was expected, and on an annualized basis the CPI was up 3.3% when up 3.4% was estimated.


Also, the CPI excluding food and energy on a month to month basis was up 0.2% when an increase of 0.3% was forecast, and the CPI excluding food and energy on an annualized basis was up 3.4% when an increase of 3.5% was estimated.

The Federal Open Market Committee concludes its two-meeting today. A statement will be released at 1:00 central time and Fed Chair Powell will hold a press conference at 1:30. The Fed is expected to keep interest rates steady, but investors will scrutinize the “dot plot” to gauge the projected number of interest rate cuts for the year.

The longer term fundamentals remain supportive to stock index futures.


The U.S. dollar index was lower in the overnight trade, but the decline accelerated when the bearish May consumer price index was released.

The U.K. economy stalled in April 2024, its weakest performance in four months, after a 0.4% increase in March, and was in line with expectations.

Economists expect the Bank of England to keep its interest rates unchanged at the June 20 policy meeting. However, it is widely anticipated that the BOE will lower its key rate at its August meeting.

Japan’s wholesale inflation increased in May at the fastest annual pace in nine months. Producer prices in Japan jumped 2.4% year-on-year in May 2024, accelerating from an upwardly revised 1.1% gain in April and posting the highest level since August last year. The latest figure also exceeded market predictions of a 2.0% increase.

The Bank of Japan will hold its policy meeting on Friday. Traders expect the BOJ will leave interest rates unchanged, although there is a small chance of an interest rate increase. The focus of attention will most likely be on the monetary policy statement and press conference.


Futures are higher across the board, especially at the longer end of the yield curve in light of the bullish consumer price index report.

Yesterday’s U.S. Treasury auction of $39 billion of 10-year notes was very well received with the bid/cover ratio of 2.67, which was the highest since February 2022.

Financial futures markets are predicting there is a 69% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting. Before today’s CPI release the probability of a September rate reduction was 50%.

The long term fundamentals are bullish on balance, especially for futures at the long end of the yield curve.


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