The May 2026 inflation report landed on June 10. Core CPI rose just 0.2% month-over-month, undershooting the 0.3% forecast, and that small miss was enough to send short-term Treasury prices climbing as traders dialed back expectations for another Federal Reserve rate hike.
The numbers that moved markets
Headline CPI for May came in at 0.5% month-over-month and 4.2% year-over-year, both right in line with what economists expected. The core reading, stripping out food and energy, rose just 0.2% on the month, a tick below the 0.3% consensus. On a year-over-year basis, core CPI printed at 2.9%.
Short-term Treasuries rallied on the data. Yields on the front end of the curve fell as bond prices rose, reflecting a market that’s growing less convinced the Fed needs to tighten further at its June 17 meeting.
The Fed funds rate currently sits at 3.50% to 3.75%. Most market participants are pricing in a hold at the upcoming meeting, with potential hikes pushed further out into the second half of 2026.
