The May consumer price index report will offer a window into where Americans are facing the most inflation throughout the economy, and give a hint as to whether the Federal Reserve might cut interest rates this year. Here are five things to watch in the data, which will be released Wednesday, May 15 at 8:30 a.m. Eastern. 

  1. Moderating core inflation

Economists are predicting a 3.9% annual rise in overall prices. But when stripping out the volatile food and energy sectors, creating what is called the “core” CPI, forecasts look more like 3.6%. That would be the lowest annual core CPI in three years, a signal that price acceleration is moderating.

  1. Focus on the Fed

With last month’s CPI report, the likelihood of rate cuts this year from the Federal Reserve was dampened. Last month’s report saw both the headline and core annual inflation up from the month previous. But the hope for cuts this year was revived by a slower-than-expected jobs report earlier this month. 

This direction of Wednesday’s report will likely give some clarity to the Fed’s approach this year. 

If inflation recedes more than expected, Fed officials, who aim for 2% inflation, may feel confident enough to lower rates. 

But if Wednesday’s report shows higher inflation than anticipated, discussion of rate hikes from the Fed might begin in earnest, said Jason Schenker, president and chief economist at Prestige Economics. 

“If you were to see an additional acceleration, I think the talk of additional Fed rate hikes would heat up,” Schenker said. 

  1. Shelter costs

Economists said they will be paying keen attention to the “shelter” category of Wednesday’s report. In March, rent and other shelter expenses saw 5.7% annual inflation, driving more than 60% of the total core annual inflation, according to the Bureau of Labor Statistics. 

But other data paint a different picture. For example, Apartment List’s monthly rent index shows rents down 0.8% annually last month. The CPI is likely to reflect those changes in the future, said Russell Price, chief economist for Ameriprise Financial. 

“It truly is just a waiting game,” Price said. “Because in the real world, shelter costs are flat.”

If shelter costs decelerate significantly, much of overall inflation will likely be eased. 

  1. Gas prices

Although gas prices are just one element of the CPI report, they have an outsized influence on consumer sentiment. Gas prices over the last several months have been rising quickly. In February, prices spiked 3.8% in just one month. In March, that number was 1.7%. 

May data from AAA shows gas prices increasing 3 cents from the month previous. But as summer weather takes over, that price may rise further. Summer typically means higher demand for gasoline, as well as what refineries call “summer-blend” gas, which limits emissions and is more expensive to produce. 

  1. Car insurance costs as a focus

The transportation category saw the highest annual inflation in last month’s report, at 10.7%. Car insurance and car repair costs made up the bulk of that increase, after going up by 2.6% and 3.1% respectively in just one month. For insurance costs, that represented the highest month-to-month inflation in nearly 50 years. Year over year, that translated to a 22.2% surge in car insurance costs. 

There’s likely no one reason for that jump. Auto insurers are receiving both more claims and more severe claims. Cars are more expensive, and more expensive to repair, than pre-pandemic. And high interest rates generally lead to premium hikes. 

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