The University of Michigan final May sentiment index fell to 44.8, below April’s 49.8 and the 48.2 preliminary reading. One-year inflation expectations rose to 4.8% and long-run expectations climbed to 3.9%, keeping the release in the Fed-relevant macro category.
Fed funds futures markets have shifted to price in a rate hike — not a cut — as the next move by the Federal Reserve, with December the earliest expected date. The Survey of Professional Forecasters from the Philadelphia Fed now projects Q2 CPI at 6%, more than double its 2.7% forecast from three months ago. The 30-year Treasury yield has crossed 5.1%, and newly installed Fed Chair Kevin Warsh faces immediate internal pressure on the direction of policy.
April U.S. Producer Price Index jumped 6.0% year-over-year (consensus: 4.8%) and 1.4% month-over-month (consensus: 0.5%), marking a four-year high for wholesale inflation. Core PPI hit 5.2% YoY against a 4.3% estimate, driven by energy price surge from the 11-week Iran-Gulf conflict. Bank of America pushed its first Federal Reserve rate-cut forecast to July 2027, with Kalshi prediction markets now pricing 47% odds of a hike before that date.
U.S. consumer prices rose 3.8% annually in April — 0.1 percentage point above the Dow Jones consensus and the highest since May 2023. Energy prices surged 17.9% year-over-year as WTI oil topped $100 per barrel amid the Iran-Hormuz conflict, while real average hourly wages turned negative on an annual basis for the first time in three years. CME Group data shows markets now pricing roughly 30% probability of at least one Fed rate hike before year-end.
The University of Michigan's preliminary May 2026 consumer sentiment reading of 48.2 set a new all-time record low, breaking the prior trough of 50.0 from June 2022. Surging gasoline prices from Iran's Hormuz blockade are the primary catalyst, complicating the Fed's rate path while the S&P 500 posts six consecutive weeks of gains.
South Korea's consumer price index rose 2.6% year-on-year in April 2026, hitting its highest level in 21 months, driven by a fuel-price shock tied to the U.S.-Iran conflict. Gasoline prices surged 21% and diesel 30% year-on-year, complicating the Bank of Korea's room to cut interest rates further.
The ECB left its deposit rate at 2.00% on April 30 and kept the main refinancing and marginal lending rates at 2.15% and 2.40%. The bigger message was that energy prices are now pushing inflation risks up while growth risks are moving the other way.
The Fed left the federal funds target at 3.50%-3.75% on April 29, but the real signal was a four-way dissent that exposed a deep split over how quickly policy should pivot. Energy-driven inflation risk is now colliding with softer labor momentum inside the Committee.
The Bank of Japan kept the overnight call-rate target at around 0.75% in a 6-3 vote and lifted its FY2026 core CPI view to 2.5%-3.0%. The April outlook said an oil shock tied to the Middle East would slow growth in 2026 even as inflation risks skew upward.
UK CPI rose to 3.3% in March from 3.0% in February, in line with Reuters-polled expectations, while ONS data showed motor fuels made the largest upward contribution.
U.S. producer prices rose 0.5% in March, well below the 1.1% consensus cited by CNBC, while core PPI increased just 0.1%. The downside surprise came even as energy prices jumped, complicating the inflation picture but reinforcing the case for a cautious Fed.