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U.S. inflation is fueling bets that the Federal Reserve will get more aggressive about trying to cool price pressures and even potentially ditch its own forward guidance by delivering a jumbo-sized interest rate hike in coming months. Fed policymakers had already all but promised half-point interest rate hikes at their meeting next week and again in late July, following May's half-point hike and the start of balance sheet reductions this month. That would be more policy tightening in the space of three months than the Fed did in all of 2018.

Annual inflation rate in the US unexpectedly accelerated to 8.6% in May of 2022, the highest since December of 1981 and compared to market forecasts of 8.3%. Energy prices rose 34.6%, the most since September of 2005, due to gasoline (48.7%), fuel oil (106.7%, the largest increase on record), electricity (12%, the largest 12-month increase since August 2006), and natural gas (30.2%, the most since July 2008). Food costs surged 10.1%, the first increase of 10% or more since March 1981. Big increases were seen in prices of meats, poultry, fish, and eggs (14.2%). Other increases were also seen in cost of shelter (5.5%, the most since February 1991), household furnishings and operations (8.9%), used cars and trucks (16.1%) and airline fares (37.8%) while cost of new vehicles eased slightly (12.6% vs 13.2%). Meanwhile, core inflation rate slowed for a second month to 6%, compared to expectations of 5.9%.

China's annual inflation rate was at 2.1% in May 2022, unchanged from April's five month high figure and compared with market forecasts of 2.2%. Prices of food rose the most since September 2020, up for the second straight month (2.3% vs 1.9% in April), as consumption strengthened following an easing of COVID-19 curbs in some major cities, including Shanghai and Beijing. Meanwhile, cost of non-food continued to increase (2.1% vs 2.2%), driven by housing (1.0% vs 1.2%), transportation & communication (6.2% vs 6.5%), education, culture (1.8% vs 2.0%), clothing (0.6% vs 0.5%), household goods and services (1.4% vs 1.2%), and healthcare (0.7% vs 0.7%). China has set a target of CPI at around 3% for this year, the same as in 2021. On a monthly basis, consumer prices fell 0.2% in May, the first monthly decline in five months, compared with consensus of a 0.3% drop, and reversing from a 0.4% gain in April.

Japan's consumer prices rose by 2.5% yoy in April 2022, the most since October 2014, after a 1.2% gain a month earlier. The latest figure also marked the 8th straight month of annual inflation, with food prices rising at the fastest pace in 7 years (4% vs 3.4% in March). Additional upward pressures also came from cost of fuel, light and water charges (15.7% vs 16.4%), clothes & footwear (0.8% vs 0.7%), culture & recreation (1.3% vs 1.3%), housing (0.4% vs 0.3%), furniture (2.3% vs 0.4%), education (0.9% vs 1.4%), and miscellaneous (1.2% vs 1%). At the same time, cost of transport fell by 0.2%, much softer than a 7% drop in March. Meanwhile, prices of medical care dropped further(-0.7% vs -0.4%). Core consumer prices went up 2.1% yoy, the 8th consecutive month of rises and the most since March 2015, matching forecasts and beating the BoJ’s 2% target for the first time in seven years. On a monthly basis, consumer prices went up 0.4% in April, the same pace as in the prior two months.

The Euro Area inflation increased to 8.1% in May of 2022, a fresh record high, from 7.4% in each of the previous two months and well above market forecasts of 7.7%. Preliminary estimates showed energy prices continue to record the biggest increase (39.2% vs 37.5% in April) although there is a widespread price increase, including for food, alcohol and tobacco (7.5% vs 6.3%), non-energy industrial goods (4.2% vs 3.8%) and services (3.5% vs 3.3%). Excluding energy, inflation accelerated to 4.6% from 4.1%, more than the double the ECB target of 2%, in a sign price pressures in Europe remain elevated and have not peaked, strengthening the case for the ECB to start raising borrowing costs.

UK inflation jumped to 9% in April, the highest level since 1982, prompted by rising prices for electricity, gas and other fuels, motor fuels and second-hand cars, in another sign consumers' living standards continue to squeeze. It compares with a rate of 7% in March and forecasts of 9.1%. Biggest upward pressure came from cost of housing and utilities (19.2% vs 7.7%), following the increase in the Office of Gas and Electricity Markets cap on energy prices. Electricity prices soared 53.5%, gas 95.5% and liquid fuels 113.9%. Cost of transport also continued to increase (13.5% vs 13.4%), with average petrol prices reaching a record of 161.8 pence per litre in April, compared with 125.5 pence per litre a year earlier. The inflation also accelerated for restaurants and hotels (7.9% vs 6.9%) and food and non-alcoholic beverages (6.7% vs 5.9%). On a monthly basis, consumer prices jumped 2.5%.

Russia annual inflation fell to 17.1 percent in May of 2022, below market expectations of 17.3 percent, from 17.8 percent in the previous month, which was the highest since January of 2002. On a monthly basis, consumer prices went up 0.1 percent, after a 1.6 percent jump in April and also lower than forecasts for a 0.3 percent increase. Prices slowed for food (0.6 percent vs 2.9 percent in April) while the cost of non-food (-0.1 percent vs 0.5 percent) and services (-0.3 percent vs 1.1 percent) fell.

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