• Core inflation at 0.4% month-on-month exceeded the expected 0.3%, reducing the likelihood of a June Fed rate cut.
• Market expectations for a June cut fell sharply from 15 basis points to just 5.5bp following the inflation report.
• A June cut would likely require payroll growth near 100k and core CPI at 0.2% in the next reports.
• The core CPI's slight exceedance of expectations is still double the pace needed for a 2% annual inflation target.
• Given current inflation trends, a Fed rate cut before September is improbable, capping potential cuts at three for the year.
• Supercore services led inflation increases, with notable rises in medical care and transport services, while some categories like vehicles and airline fares saw price drops.