Happy Wednesday, investors. The May inflation report is due this morning and it could make or break the Fed’s case for rate cuts this summer. We’ve got what to know below.

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May CPI comes due

Inflation has cooled every month in 2025 so far but that streak could end today, according to both consensus estimates and alternative indicators.

The May CPI report, due at 8:30 AM ET, is expected to hit 2.5% year-over-year, according to FactSet.

That would be higher than the 2.3% seen in April, and it would mark the first increase from the prior month since January.

While President Trump has pointed to cooling prices as a reason for rate cuts, the Federal Reserve has kept rates unchanged to guard against tariff-fueled disruptions that could derail a soft landing — though they have yet to show up in the inflation data.

Alternative indicators are also predicting a bump in price growth. 

Truflation, a real-time inflation tracker, showed annual inflation at 1.60% in early May.

This week, it reached 1.93% — still modest but trending higher. It’s also a notable step up from the 1.22% seen the week of Liberation Day.

The Fed has held rates steady all year in part to insulate against a trade war. But tariffs aren’t the only inflationary pressure at play. 

Last month, the White House abandoned its fiscal restraint and pivoted to big spending, swapping its cost-cutting agenda to run the economy hot.

That shift — which sparked the public fallout between Elon Musk and President Trump — could feed price growth in the coming months.

Still, the broader economic picture is full of contradictions. 

Sentiment among consumers and business leaders has both improved since last month.

The latest New York Fed survey, as Opening Bell Daily reported Monday, shows consumers’ 12-month inflation expectations dropped from 3.6% in April to 3.2% in May. 

Meanwhile, the majority of C-suite executives expect improving business conditions and robust consumer demand for products this year, according to the latest CEO Confidence Index.

If May CPI comes in hot, as economists predict, the Fed’s wait-and-see stance will look prescient.

But if it surprises cooler once again, it will force everyone to ask the narrative-breaking question about how inflationary tariffs really are.

Market snapshot

Elsewhere

🤝 US-China agree to restore Geneva pact. Negotiators from both sides wrapped up 2 days of talks in London and ratcheted tensions down. “The two largest economies in the world have reached a handshake for a framework,” Commerce Secretary Lutnick said. (WSJ)

🏦 Treasury Secretary Scott Bessent for Fed? A growing chorus of insiders and advisers around the Trump Administration are pushing the name to success Fed Chair Powell. President Trump said he plans to name the next central banker “very soon.” (Bloomberg)

🚗 Tesla stock rallied big Tuesday. Elon Musk and Trump seem to be cooling on their public feud, and shareholders for the EV maker have pushed the stock higher for three days in a row. Tesla is on the brink of rolling out unsupervised robotaxi testing. (Yahoo Finance)

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Rapid-fire

• A federal appellate court granted the White House’s request to keep tariffs in effect for now (WSJ)

• GameStop missed revenue expectations and confirmed purchase of 4,710 bitcoin between May 3 and June 10 (StockStory)

• Cheap Chinese goods are still making their way to the US despite tariffs (Yahoo Finance)

• Moody’s is raising red flags around the push for retail investors to buy into private credit (Reuters)

• Google is offering buyouts to employees across the company, including search (CNBC)

• The World Bank estimates global economy on pace for slowest growth in any non-recessionary year since 2008 (Axios)

• Trump’s pick to lead the US Commodity Futures Trading Commission touted his crypto background to lawmakers (Bloomberg)

• The plan for every American to own US stocks is very good (Pomp Letter)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].