CPI Preview-Is Inflation Picking Up Steam?

The Consumer Price Index (CPI) a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers, is set to be released at 8:30 ET. The CPI indicates monthly change in the rate of inflation, with consensus estimates for May at a 0.5 percent increase, with a range from 0.3 to 0.6 percent. This compares to a 0.1 percent increase in April. Core CPI, which is CPI less the more volatile food and energy components, is expected to show a lower inflation reading of just 0.2 percent. The consumer price index has been showing some increased inflationary pressure recently,with the year-on-year core rate approaching nearly 2 percent. The CPI number will be the first economic data set released post yesterday's FOMC meeting, and some economists feel a stronger inflation reading from today's CPI might give the Fed cause to begin hiking rates sooner than later. Deutsche Bank's chief U.S. economist, Joseph LaVorgna, said he believes the acceleration in CPI will continue. He points to shelter costs, the largest component of the CPI, are likely to rise given vacancy rates at 22 year lows. "If we get a high number tomorrow the market will react," said LaVorgna. Fed Chairwoman Janet Yellen indicated that concern in a statement yesterday, saying the Fed could raise rates once, if not twice, this year should it see improvement in economic data, including inflation.