Reuters Interview 6/10/22

NEW YORK, June 10 (Reuters) – U.S. consumer prices accelerated in May as gasoline prices hit a record high and the cost of services rose further, suggesting that the Federal Reserve could continue with its 50 basis points interest rate hikes through September to combat inflation.

The consumer price index increased 1.0% last month after gaining 0.3% in April, the Labor Department said. Economists polled by Reuters had forecast the monthly CPI picking up 0.7%. In the 12 months through May, the CPI increased 8.6% after rising 8.3% in April.

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Excluding the volatile food and energy components, the CPI climbed 0.6% after advancing by the same margin in April. The so-called core CPI increased 6.0% in the 12-months through May. That followed a 6.2% rise in April. Inflation by all measures has far exceeded the Fed’s 2% target. read more

MARKET REACTION:

STOCKS: Futures tracking the S&P 500 index tumbled on Friday after data showed consumer prices rose more-than-expected in May.

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COMMENTS:

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“Obviously, the numbers were higher than expected but most due to high energy costs and that is a problem for now, but going forward we should see some relief there as demand begins to wane possibly during the summer months.”

“These are ugly numbers, but higher energy prices should mean less use of energy and that should cool off inflation.”

“The Fed will still raise interest rates by 50 basis points in June, 50 basis points in July and maybe again in September.”

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“Disposable income will be cut back and obviously it all point to recession. I’d say we’ll probably be in a recession in the fourth quarter of this year with confirmation in the second quarter of 2023.”

“I see a short and sweet recession, just a cooling off period and that’s going to be due to the consumer pulling back.”