“US Inflation hits a 3 year high”
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Market Mood
US inflation surged to a three‑year high of 4.2% in May, driven by elevated oil prices from the Middle East conflict and knock‑on effects across the economy. Core inflation, excluding food and energy, remains at 2.9%, still above the Federal Reserve’s 2% target. This places new Fed Chairman Kevin Warsh in a challenging position, balancing President Trump’s push for lower rates against strong employment data and rising inflation.
Fixed income markets are pricing in a “higher‑for‑longer” stance, while equities have so far treated the spike as temporary, buoyed by strong corporate earnings. Consensus is shifting toward expectations of a Fed rate hike.
From a portfolio perspective, shorter‑duration US Treasuries, yielding just above 4%, offer defensive balance against equities, making them a prudent allocation amid global markets near all‑time highs.