US Inflation Update

MUFG anticipates May 2026 CPI data will align with consensus estimates, driven by a normalization in shelter costs. While markets remain cautious of inflation upside risks from geopolitical energy shocks, the firm views the upcoming report as a key input for the June FOMC meeting.

Key Takeaways

• 1.MUFG forecasts May 2026 headline CPI at 0.47% MoM (4.2% YoY) and core CPI at 0.28% MoM (2.9% YoY).
• 2.CPI shelter component distortions from the October 2025 missed collection are expected to resolve, with OER growth normalizing to ~0.25% MoM.
• 3.Markets are less reactive to a soft CPI print, but an upside surprise could trigger a sell-off due to oil price risks and broadening inflation.

Table of Contents

• Data Preview & Forecast
• Market Thoughts
• Conditional FOMC Meeting Probabilities
• MUFG forecast is in line with Bloomberg consensus for May 2026
• A normalization of the CPI Shelter component
• Market-based 1 year inflation expectations returns to pre-war level
• Core CPI would need to be especially HOT to trigger a strong sell-off