Treasury prices edged higher after May’s core inflation reading came in a touch cooler than Wall Street anticipated on a monthly basis.
Core CPI, which strips out volatile food and energy prices, rose 0.2% month-over-month in May 2026. Economists had penciled in 0.3%. That single tenth of a percentage point was enough to nudge Treasury yields lower and prices slightly higher, as traders recalibrated their near-term expectations for Federal Reserve policy.
The numbers behind the number
On a year-over-year basis, core CPI landed at 2.9%, up from 2.8% the prior month and matching consensus forecasts. That 2.9% reading marks the highest level since September 2025. Shelter costs, transportation services, and medical care were the primary culprits pushing the annual figure higher.
The headline CPI number, which includes food and energy, surged to 4.2% year-over-year, up from 3.8% in April 2026 and the hottest reading since April 2023. The energy index alone was up 23.5% year-over-year, a surge tied to geopolitical tensions related to the Iran conflict.
