Markets May Be a Bit Too Relaxed About Inflation

US inflation accelerated in May to the fastest pace in more than three years, driven by higher energy prices after the Iran war. The report implies inflation is running ahead of Americans' pay gains, a negative mix for real purchasing power and a potential setback for monetary policy expectations. The surprise is likely to have broad market implications across rates, equities, and commodities.

Analysis

US inflation accelerated in May to the fastest pace in more than three years, driven by higher energy prices after the Iran war. The report implies inflation is running ahead of Americans' pay gains, a negative mix for real purchasing power and a potential setback for monetary policy expectations. The surprise is likely to have broad market implications across rates, equities, and commodities.