Inflation Cools In May, But Tariff Effect Delayed

The US inflation for May shows a deceptive calm : +0.1% for the month, a figure below forecasts that immediately boosted risky assets. However, behind this lull lie more lasting tensions, fueled by the aggressive return of tariff increases decided by the Trump administration. This seemingly reassuring number hides a more unstable reality, where weak signals of an upcoming inflation resurgence trigger doubts about the strength of the current economic cycle.

Inflation under control : a May that soothes markets

After a tumultuous April with Donald Trump’s new tariffs that triggered instability in global financial markets, May offers a relative lull.

Indeed, the latest report from the Bureau of Labor Statistics shows that US inflation remained moderate in May, with a 0.1 % monthly increase and an annual inflation of 2.4 %. These figures are below economists’ expectations, who had anticipated a 0.2 % monthly rise.

Even the “core” inflation, which excludes energy and food products, increased by only 0.1 %, against the expected 0.3 %, and remains stable at 2.8 % year-on-year.

“Today, inflation is below forecasts, which is reassuring, but only up to a point,” stated Seema Shah, Lead Strategist at Asset Management.

This statistical decline is explained notably by the decrease in prices across several sectors sensitive to economic cycles.

The components of the index detail a mixed dynamic :

• Energy : a 1 % drop for the month, with a marked decline in gasoline by 2.6 % (−12 % year-on-year) ;
• Vehicles : a 0.3 % decrease for new and 0.5 % for used cars ;
• Clothing : a 0.4 % drop, contrary to tariff hike expectations ;
• Furniture : a 0.8 % price decline, the steepest fall since December ;
• Housing and food : the only categories with rises (+0.3 % each), the main drivers of the CPI increase ;
• Real hourly wages : up 0.3 % for the month, 1.4 % year-on-year.

This publication immediately had market effects. Yields on US Treasury bonds fell because major holders are increasingly attracted by cryptos , especially bitcoin. It is a sign that investors anticipate a slowdown in inflationary pressures, and stock futures turned positive.

For Donald Trump and his vice-president JD Vance, these figures prove that the Federal Reserve must act swiftly.

On social network X (formerly Twitter), Vance criticized the Fed’s monetary inaction and spoke of a “monetary professional misconduct”. He calls for an immediate rate cut.

However, Fed officials remain cautious. Despite signs of improved purchasing power, persistent employment tensions and medium-term tariff prospects encourage restraint.

Tariffs: delayed effects threatening price stability

Beyond reassuring figures, several economists and institutions warn that the real impact of tariffs imposed by the Trump administration that caused market drops has not yet fully manifested in inflation data.

Most companies surveyed by the New York Federal Reserve reported they have started passing these cost increases on to consumers. Nearly half of the service companies have fully passed tariffs onto their customers.

However, these adjustments remain heterogeneous. Only a third of manufacturers have done the same, while others still rely on stocks built before the tariffs took effect. The Fed report furthermore indicates that many companies plan to raise prices “within the next three months”.

This adjustment delay represents a structural risk for price stability. David Kelly, chief strategist at JPMorgan Asset Management, considers the tariffs’ effect in May as “microscopic”, but reminds that companies “often take three months or more before passing on cost increases”.

He believes that if tariffs remain in place, inflation could reach 4 % by the end of the year. The Fed report published in May aligns with this view, mentioning a scenario where “a recession is almost as likely as slow growth”, with high inflation forecasts through 2026. Inflation could then gradually return to the 2 % target by 2027, but not without causing a prolonged economic slowdown.

This worrying dynamic is accentuated by the internal reorganization of the Bureau of Labor Statistics, which has reduced its sample sizes and increased its reliance on statistical imputation, notably in several geographic areas. This methodology could introduce “blur” in the reading of current data.

While the Fed maintains its apparent calm, it still faces a growing dilemma: act too early at the risk of stifling the recovery, or too late risking an inflationary spiral. For investors, particularly within the crypto ecosystem, these uncertainties strengthen the relevance of alternative assets in an increasingly unstable global economy, as evidenced by the collapse of exchange volumes in the market .