Global Recession on the Horizon?

Macro Markets


The Consumer Price Index (CPI) revealed headline inflation rose 0.1% over last month and 4% over the prior year in May, a slowdown from April's 0.4% month-over-month increase and 4.9% annual gain. Both measures were roughly in line with economist forecasts of a 0.1% month-over-month increase and a 4.1% annual increase, according to data from Bloomberg.

The yearly inflation rate slowed from 4.9% to 4%, marking the lowest since March 2021. Grocery and gas prices have been on the wane after helping drive up inflation last year. Yet the so-called core rate of inflation that omits food and energy rose a stiffer 0.4% for the third month in a row. Wall Street had forecast a 0.4% gain. The Fed views the core rate as a better predictor of inflation trends. The increase in the core rate over the past 12 months slipped to 5.3% from 5.5%, the smallest gain since the fall of 2021. However, these prices have fallen more slowly than the broader CPI, suggesting the fight against inflation is far from over.

Core inflation remained especially sticky last month as rent prices continue to surge. The index for rent and owners' equivalent rent rose 0.5% each. Owners' equivalent rent is the hypothetical rent a homeowner would pay.

The shelter index was the largest factor in the monthly increase of core inflation. The BLS noted that prices for used cars and trucks increased by 4.4%, and motor vehicle insurance increased by 2.0%.

The energy index decreased 11.7% for the 12 months ending in May, while the food index increased 6.7% over the last year. The energy index decreased by 3.6% from April to May on a seasonally adjusted basis, while food prices rose 0.2%. Egg prices fell 13.8% in May after dropping 1.5% in April and 10.9% in March.


The Fed is currently meeting to determine its next step in its fight against inflation. The Fed has jacked up a key short-term rate by 5 percentage points since the spring of 2022 from near zero. Now it wants to see how higher borrowing costs affect inflation and economic growth. That’s why many senior Fed officials prefer to skip a rate hike this week. The high inflation rate is far from the Fed’s 2% target, and senior officials think it could take a few years to reach its goal. The big question for the Fed is whether to raise interest rates again. If inflation doesn’t subside more rapidly, however, the Fed might be forced to raise rates again and boost the odds of a recession.

Market odds for the Fed to raise the Fed funds target range by +25 bp at Wednesday’s FOMC meeting stand at 25%. The Fed is most likely going to leave rates unchanged at this meeting.

Become a member today and read the complete newsletter…

Have a friend? Share the Weekly Wizdom Newsletter and win exciting perks and rewards but most importantly you’ll make your friend smarter, Kudos to you!

Disclaimer Wizard of Soho LLC and Weekly Wizdom publish financial information based on research and opinion. We are not investment advisors, and we do not provide personalized, individualized, or tailored investment advice, nor do we provide legal advice or information. The publisher does not guarantee the accuracy of the information provided on this page. All statements and expressions present are based on the author's or paid advertiser's opinion and research. No opinion, directly or indirectly, is an offer or solicitation to buy or sell the securities or financial instruments mentioned. As news is ever-changing, the opinions included should not be taken as specific advice on the merits of any investment decision. Investors should pursue their own investigation and review of publicly available information to make decisions regarding the prospects of any company discussed. Any projections, market outlooks, or estimates herein are forward-looking and inherently unreliable. They are based on assumptions and should not be construed to be indicative of actual events that will occur. Contrarily, other events that were not considered may occur and significantly affect the returns or performance of the securities discussed herein. The information provided is based on matters as they exist on the date of preparation and do not consider future dates. As a result, the publisher undertakes no obligation to correct, update, or revise the material in this document or provide any additional information. The publisher, its affiliates, and clients may currently or foreseeably have long or short positions in the securities of the companies mentioned herein. They may therefore profit from fluctuations in the trading price of the securities. There is, however, no guarantee that such persons will maintain these positions. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile, or any other means is illegal and punishable. Neither the publisher nor its affiliates accept any liability for any direct or consequential loss arising from any use of the information contained herein. By using the site, or any affiliated social media account, you are giving your consent and agreeing to this disclaimer and our terms of use.