Inflation numbers are in and came in much higher than expected. Even the core inflation numbers for both reports were higher than anticipated. Core inflation is intended to exclude some of the most volatile components, including food and energy costs, painting a picture in which the Federal Reserve will need to continue its tightening measures until inflation is under control.

In particular, the Producer Price Index (PPI) showed a significant increase above expectations, impacting businesses and potentially trickling down to consumers over time. The retail sales report also confirms that consumers have significantly slowed their purchases compared to the previous month.

Consumer Price Index
The annual inflation rate in the US rose to 4.2% in May 2026, its highest level since April 2023, up from 3.8% in April and in line with market expectations. This marked the third consecutive month of accelerating headline inflation, with energy costs jumping 23.5% (compared to 17.9% in April), driven by the energy shock triggered by the conflict with Iran. Gasoline prices soared 40.5%, following a 28.4% increase in April, while fuel oil prices climbed 58.9% (vs. 54.3%). Inflation also accelerated for shelter (3.4% vs. 3.3%) and food (3.1% vs. 2.3%).

On a monthly basis, the CPI increased 0.5%, slightly below April’s 0.6% rise and in line with forecasts. Energy prices rose 3.9%, accounting for more than 60% of the monthly increase.

Meanwhile, the annual core inflation rate edged up to 2.9%, its highest level since September 2025, compared to 2.8% in April and matching market expectations. However, on a monthly basis, core CPI rose just 0.2%, down from 0.4% in April and below forecasts of 0.3%.

Producer Price Index
U.S. producer prices rose 2.7% year-on-year in March 2025, easing from a 3.2% increase in February and coming in below market expectations of a 3.3% rise. This marked the smallest annual gain in producer prices since September. On a monthly basis, prices fell 0.4%, following an upwardly revised 0.1% increase in February and missing forecasts for a 0.2% gain, largely driven by a sharp drop in energy costs. Despite the pullback, producer prices are expected to trend higher in the coming months due to the impact of new tariffs.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw a decrease of -0.02%, bringing the current rate to 6.71%.
• 30-Year FRM rates saw no change from last week, leaving the current rate at 7.40%.

MND Rate Index

• 30-Year FHA rates saw a decrease of -0.16%, with the current rate at 6.99%.
• 30-Year VA rates saw a decrease of -0.16%, with the current rate at 7.01%.

Jobless Claims
Initial Claims were reported to be 199,000 compared to the expected claims of 200,000. The previous week landed at 198,000.

What’s Ahead
A very light week for next week with the recent rush of inflation and job-related data. This will leave the Michigan Consumer Sentiment as the most impactful data release.

The FOMC Minutes and Consumer Sentiment report were the most impactful calendar items last week, further reinforcing the Federal Reserve’s resolve to bring inflation down to its 2% target rate.

While there is considerable speculation about another rate increase, recent analyst expectations suggest that the Fed will hold rates at their current level for some time. The Consumer Sentiment report showed a slight increase, largely driven by moderating gas prices, which have helped provide consumers with some relief.

Consumer Sentiment Report
The University of Michigan Consumer Sentiment index was revised higher to 49.5 in June 2026, up from a preliminary reading of 48.9, although it remained slightly below forecasts of 50. Still, sentiment improved from 44.8 in May, the lowest level on record, supported in part by a moderation in gasoline prices. The expectations gauge was at 50.7, the highest in three months, compared to 49.3 in the initial estimate, as consumers’ worries over long-term consequences of the Iran conflict appear to be easing.

FOMC Minutes
The Fed chief reiterated that the central bank will no longer provide traditional forward guidance on future interest-rate decisions, signaling a shift in its communication approach. Inflation risks have eased in recent weeks, but the US central bank remains committed to restoring inflation to its 2% target, Federal Reserve Chair Kevin Warsh said at the ECB’s Sintra Forum. Warsh stressed that delivering price stability remains the Fed’s primary objective, while underscoring policymakers’ independence in setting monetary policy and rejecting any suggestion that political pressure would influence their decisions.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw an increase of 0.13%, bringing the current rate to 6.73%.
• 30-Year FRM rates saw an increase of 0.12%, bringing the current rate to 7.40%.

MND Rate Index

• 30-Year FHA rates saw a decrease of -0.05%, with current the rate at 7.15%.
• 30-Year VA rates saw a decrease of -0.04%, with current the rate at 7.17%.

Jobless Claims
Initial Claims were reported to be 197,000 compared to the expected claims of 200,000. The previous week landed at 199,000.

What’s Ahead
Next week brings a full economic calendar, including the CPI and PPI inflation data releases, retail sales, and the increasingly impactful 5- and 10-year Treasury note auctions.