Nearly two weeks ago, after the release of the core PCE price index in April, which was in line with expectations, US stocks rose sharply, and the three major stock indexes directly ended record weeks of decline. At that time, the market was so overjoyed that it began to anticipate whether the next CPI data would have the same surprise.

However, a report by JPMorgan Chase & Co and the US Treasury Secretary's statement shattered the market's illusions about cooling inflation, saying that the May CPI data to be released today could exceed market expectations.

As soon as the news came out, US stocks collectively fell overnight, and the three major stock indexes fell at least nearly 2%, the biggest decline in three weeks, and have closed down for two consecutive days. At the same time, the yield on 10-year Treasuries hit a new high in nearly a month, standing firmly above 3.00%. The dollar index rose further, breaking 103.00 for the first time since late May.

JPMorgan Chase & Co: higher-than-expected energy prices and increased outbound activities are the key to the CPI data in May.

Michael Feroli, chief economist of JPMorgan Chase & Co, expects the May CPI data to be higher than the market generally expected.

Feroli wrote in the reportCPI data for May are likely to rise 0.8 per cent month-on-month, higher than market expectations of 0.7 per cent, compared with 0.3 per cent month-on-month increase in April.

This increase was mainly due to a strong rise in energy prices (4.6 per cent), including another marked rise in gasoline prices during the month, as well as continued steady increases in food prices (0.7 per cent) and core price index (0.47 per cent).

According to this prediction,JPMorgan Chase & Co expects the CPI data in May to remain at 8.3% year-on-year, unchanged from the previous month, and higher than the 8.2% widely expected on Wall Street.

But at the same time, the report also pointed out that core price index growth did slow and is expected to slow to 5.8% from 6.2% year-on-year in April, below Wall Street's consensus forecast of 5.9%.

Among them, JPMorgan Chase & Co found that there were "stable price increases" in many basic categories. Rents rose 0.49% in May, and equivalent rents for owner-owned houses (calculated rent for owner-occupied houses) rose by 0.45%.

However, Feroli says something worse has happened.That is, with the increase in outbound travel after the pandemic, accommodation prices have recently begun to rise, and he expects prices to rise strongly again in May, rising by 2%. At the same time, public transport prices have also risen sharply due to increased travel demand and soaring fuel prices, which JPMorgan Chase & Co expects to rise by 1.5 per cent in May.

In addition, the increase in car prices is not optimistic, and car prices have risen significantly in recent months. However, JPMorgan Chase & Co also expects that car prices will not change much in May, with new car prices rising 0.4% and used car prices rising slightly again.

Feroli also wrote that although headline inflation has been strong recently, communications prices have fallen in recent months. JPMorgan Chase & Co expects the decline to continue into May, with a drop of 0.2 per cent. In addition, after a sharp rise, clothing prices fell in April and are expected to fall a further 0.1 per cent in May.

Even if the market is skeptical about JPMorgan Chase & Co's analysis, the statements of US government officials make it difficult for them to ignore.

Us Treasury Secretary Yellen: food and energy prices will rise further

At an event on Thursday, U.S. Treasury Secretary Yellen acknowledged that U. S. food and energy prices are at risk of rising further.

And last Tuesday, after face-to-face meetings with Federal Reserve Chairman Powell and US President Joe Biden, Yellen admitted that the "inflation is only temporary" she predicted last year was a misjudgment and did not fully understand the situation at that time. Some unexpected shocks worsened the situation. But Ms Yellen reiterated that keeping inflation down was a priority for the government, saying the "level of inflation" facing the US was "unacceptable".

In addition, according to the media, a White House official again warned of soaring prices, saying that the White House expected "overall inflation to rise because gasoline prices in April were 8.5% higher than in May." White House officials pointed out that the upsurge in aviation fuel prices will infiltrate core inflation through higher air ticket prices. "

Of course, the government has also given some optimistic expectations by "beating a stick to a sweet jujube".

White House officials note that consumers are shifting their shopping focus from goods to services, which they believe will help ease pressure on the supply chain.

And when asked whether the U.S. economy would fall into recession, officials said the red-hot job market and growing demand for goods suggested that the United States was not in recession, which they said was "unlikely." White House officials added that the US economy was in a "good time" for the transition to stable growth. Ms Yellen also stressed that there was no sign that a recession was brewing.

But judging from the pessimistic attitude of Wall Street banks and the warning of recession in American academia, they do not seem to support the views of government officials.

In addition, a relatively unpopular indicator in financial markets that reflects the expectations of traders most sensitive to US inflation also shows that CPI, the US consumer price index, will reach or exceed 8.5 per cent in the next five months from May.

Pricing or derivatives related to the TIPS market for inflation-protected bonds suggested that US CPI growth in May, announced on Friday, would be 8.5 per cent year-on-year, higher than the median forecast of 8.2 per cent by economists and in line with the 40-year high set in March. Traders also expect inflation to climb to 8.6 per cent in June and July, hit 8.8 per cent in August and September, and fall slightly to 8 per cent in October.