Weekly Market Commentary June 16, 2025
While last week was lighter on economic data, global headlines were anything but quiet. Trade talks between the U.S. and China took center stage, and rising tensions between Israel and Iran rattled investor confidence. Still, beneath the surface, key inflation data and shifting expectations quietly shaped the market narrative. A central theme last week was inflation and inflation expectations. On Wednesday, the Department of Labor released May’s Consumer Price Index (CPI) data. Core CPI – excluding food and energy – rose just 0.1% in May, below the 0.3% forecast. This marked the second straight month of softer inflation, bringing Core CPI back to March 2025 levels and suggesting inflationary pressures may be easing.
On Thursday, the Producer Price Index (PPI) echoed this trend. Core PPI also rose 0.1%, under the 0.3% forecast. While higher than April’s revised -0.2%, it still marked a second month of subdued input costs. This could support wider producer margins and, potentially, lower consumer prices, adding downward pressure on core inflation.
On Friday, the University of Michigan released its preliminary June Inflation Expectations. One-year expectations dropped sharply to 5.1%, down from 6.6% in May and well below the 6.4% consensus. Five-year expectations met forecasts at 4.1%, also lower than the prior month. The report noted that while concerns about tariffs have eased, expectations remain elevated compared to late 2024, reflecting continued unease around trade policy.
Improved Consumer Expectations and Sentiment readings reflected this shift, though the report emphasized that sentiment remains cautious. Views on business conditions, personal finances, major purchases, labor markets, and equities are still well below December 2024 levels.
Despite easing inflation, interest rates moved higher across the curve. Yields rose in last week’s 3-, 10-, and 30-year Treasury auctions, as markets continue to monitor inflation expectations, fiscal deficits, and credit outlooks.
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