NEWS

Fresh U.S. inflation data for May 2025 has just been released, showing further signs of cooling price pressures. The latest figures have reinforced market speculation that the Federal Reserve may have room to begin cutting interest rates later this year if inflation continues to ease.

The headline Consumer Price Index (CPI) rose 2.4% year-over-year, slightly below economists’ expectations of 2.5%. While this is higher than the previous month’s 2.3%, it still reflects moderate inflation. On a monthly basis, CPI increased by just 0.1%, also below the forecast of 0.2%, indicating a continued slowdown in price momentum.

Meanwhile, the Core CPI — which excludes volatile food and energy prices — posted a 2.8% increase year-over-year, falling short of the expected 2.9%. On a month-over-month basis, core inflation came in at 0.1%, well below the projected 0.3%. These lower-than-expected readings suggest that underlying inflationary pressures are softening, providing the Fed with additional flexibility.

Market Outlook: September Rate Cut Becomes More Likely

Following the release, traders increased their bets on a rate cut as early as September. Markets are now pricing in two rate cuts by the end of 2025, reflecting growing confidence that the Fed may shift toward a more dovish monetary policy stance if inflation trends continue.

Market Reaction: Dollar Slips, Gold Surges

Financial markets reacted swiftly to the data. The U.S. Dollar Index (DXY) fell by 0.38%, reaching 98.695 against a basket of major currencies. The decline reflects expectations of lower future interest rates, which typically reduce demand for the dollar.

In contrast, gold prices jumped as investors sought safety and hedged against future rate cuts. Gold futures rose by 1%, hitting $3,354.06 per ounce, while spot gold climbed 0.95% to $3,354.24. Gold tends to perform well when interest rates fall, as it becomes more attractive relative to yield-bearing assets.

Wall Street Turns Positive

U.S. equity markets responded positively to the inflation report. In pre-market trading, Dow Jones Industrial Average gained 92 points (0.25%), the S&P 500 rose 0.36%, and the tech-heavy Nasdaq Composite advanced 0.45%. Investors appear to be optimistic about a potential easing cycle and its impact on corporate earnings and borrowing costs.