Inflation Eased to 4% in May, Still Well Above Fed Target

These numbers (from Nick Timiraos of the WSJ) highlights how sticky the core inflation is:

  Core CPI for May 2023

  3-month annualized rate: +5.0%
  6-month annualized rate: +5.1%
  12-month change: +5.3%

  Core CPI for May 2022

  3-month annualized rate: +5.8%
  6-month annualized rate: +6.4%
  12-month change: +6.0%

Fed fund rates has gone up over 4% since May 2022 yet core inflation barely dropped, the economy still going strong and not slowing down significantly (compared to historical labor data and jobs opening, consumer spending), yet this somehow supports the soft landing narrative. Assuming tomorrow FOMC is set to pause, and without any dramatic change in financial conditions due to lagging effect of FFR, I think it's at least equally likely that we'll see a (hopefully mini) repeat of the Burns-Volcker before core inflation drops to its 2% target.