To The Moon

On Wed, 11 Jun 2025, US consumer price index (CPI) for May 2025 was released.

On a day when inflation was milder than expected and US-China trade talk has borne fruits as trumpeted by Trump on Truth Social, US market pulled back, snapping a 3-day winning streak.

Strange isn’t it ?

By the time US market closed midweek: (see above)

• DJIA : -0.00% (-1.10 to 42,865.77)

• S&P 500: -0.27% (-16.57 to 6,022.24).

• Nasdaq: -0.50% (-99.11 to 19,615.88).

May 2025 CPI details.

Headline Inflation:

• MoM: increased 0.1% from April to May, down from 0.2% the prior month,

• Annual : rose 2.4%, up from 2.3% in April 2025.

Core Inflation: was a lacklustre performance.

• MoM: came in at 0.13% (unrounded) vs 0.237% in April.

• Annual: came in at 2.8%, unchanged from April 2025.

Economists say inflation has been slow to respond to Trump's sweeping tariffs as most retailers are still selling merchandise accumulated before the import duties took effect.

CPI Accuracy ?

Actually, there is a need to doubt CPI’s May 2025 data and going forward.

This is because :

US Bureau of Labour Statistics (BLS), that also reports other important economic data like US Employment (Nonfarm Payroll) report, has announced on 4 Jun 2025, the suspension of CPI data collection in 3 US cities because of resource constraints. (see below)

Like all government agencies, BLS has been severely affected by:

1. Mass firings.

2. Voluntary resignations.

3. Early retirements.

4. Hiring freezes, part of Trump’s unprecedented campaign to drastically reduce the size of government and remake it.

BLS has also announced that after release of the July 2025 PPI data/report in August 2025, it will stop calculation and publication of about 350 indexes.

That includes data from:

1. PPI industry.

2. Commodity.

3. Final demand-intermediate demand.

4. Special index classifications.

With less data, economists & analysts will be less informed. That is great news for Trump because no official data is available to dispute what Trump can spew from August onwards.

Interest Cut In June 2025?

With the FOMC team set to convene the week from June 17-18, attention once again turn to whether the Fed will cut interest rate in June 2025.

The opportunistic president had already seized on the benign CPI report and demanded US central bank lower rates by -1.0%.

FOMC has made known their positions on interest cut on a few occasions:

• On 4 Jun 2025, in the latest Beige Book released, the Fed has noted "widespread reports of contacts expecting costs and prices to rise at a faster rate going forward".

• The Fed will want to see how pricing and its knock-on effect will develop over the summer.

• Last but not least, what is going to happen after 09 Jul 2025, will Liberation Day tariffs be reinstated; or extended further, is still an unknown with possible repercussions.

The Fed (a responsible institution) cannot lower interest rates and then quickly raise them again. Doing so would be very risky, as it could impact the US market

Price Hike.

A few retailers have boldly announced intentions to raise prices from May 2025 onwards due to tariffs impact. Retailers included:

• $Wal-Mart(WMT)$. On 16 May 2025, the giant retailer has officially announced they will adjust their prices up from end May 2025 onwards, due to the high costs of tariffs, (see above)

Walmart YTD performance with moving averages as of 11 Jun 2025

• Walmart’s stock has shown resilience with a strong year-high and a solid market cap, but recent sessions have seen some pullbacks.

• Looking at its green, 20-day moving average (ma), red, 50-day ma and black, 200-day ma, Walmart is experiencing a short-term pullback or consolidation, but its medium- and long-term trends are still intact & positive.

• Walmart is likely to remain stable overall with bouts of volatility in the short term.

• Long-term performance depends on how well Walmart manages the balance between passing on costs and maintaining customer loyalty.

• $Mattel(MAT)$. On 10 May 2025, CEO Ynon Kreiz has announced that Mattel will increase price and shift its China production base elsewhere, where tariffs are lower.

• $Ford(F)$. On 07 May 2025, car maker Ford announced it will revise prices to 3 of its made-in-Mexico autos due to high tariffs. Price hike will kick in on 05 Jul 2025.

It is only a matter of time before other retailers will adjust their prices higher.

CME FedWatch Tool - latest.

The Fed’s intention has also been captured by CME Fedwatch tool loud and clear. (see below)

• Above is the latest CME Fedwatch tool after CPI data was released.

• Probability of interest rate remaining status quo @ 4.25% - 4.50% remains at 99.8% high.

• This leaves only a 0.20% probability that Fed will raise interest by 25 points.

Keeping interest rate status quo will keep US govt costs of borrowing - higher and longer, to the detriment of Trump’s big, beautiful bill that is expected to add another $2.4 trillion to national debt.

More important, Fed chair Jerome Powell had better be mentally prepared for more rounds of verbal abuse by Trump over various social media platform in the days to come. Poor chap !

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• Do you think the Fed will keep interest unchanged or cut it due to pressure ’?

• Do you think it makes sense to keep interest intact or cut it and risk inflation’s return ?

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