Last Wednesday’s CPI report, while not a surprise, still showed a year-over-year inflation rate of 4.2% - higher than in any month since April, 2023. For investors, this raises a number of questions. First, is this the peak for U.S. inflation and, if it is, how fast will inflation fall from here? Second, are we looking at the right inflation rate, anyway, given differences between CPI and PCE deflators, headline and core measures and the new Fed Chairman’s preference for trimmed mean and median readings?

The Inflation Outlook and Fed Policy under New Leadership

Notes on the Week Ahead

# Full Transcript

**Podcast:** Notes on the Week Ahead

## Participants

- **David Kelly** (J.P. Morgan Asset Management)

## Transcript

Hello, and welcome to Notes on the Week Ahead, a J.P. Morgan Asset Management podcast that provides insights on the markets and the economy to help you stay informed in the week ahead. Hello, this is David Kelly. I'm Chief Strategist here at J.P. Morgan Asset Management. Today is June 15, 2026.

Last Wednesday's CPI report, while not a surprise, still showed a year-over-year inflation rate of 4.2%, higher than in any month since April 2023. For investors, this raises a number of questions. First, is this the peak for U.S. inflation, and if it is, how fast will inflation fall from here?

Second, are we looking at the right inflation rate anyway, given differences between CPI and PC deflators, headline and core measures, and the new Fed chairman's preference for trim to mean and median readings? Finally, what does the inflation outlook imply for this week's Fed decision and the direction of monetary policy and interest rates? Consumer prices rose by 0.47% in May, resulting in a year-over-year increase of 4.17%.

Most of this gain, 0.28% to be exact, was due to a 7% jump in gasoline prices. However, the inflation story was more mixed elsewhere, boosted by gains in electricity prices, tobacco prices, and airline fares, but restrained by reported declines in the prices of new vehicles, medical commodities, and auto and health insurance. All of that being said, it's possible that May was the high-water mark for the current inflation surge.

First, taking a look at June, the average price of a gallon of regular gasoline peaked at $4.56 on May 21st, and has fallen back to $4.07 since. Even if it rose a penny a day for the rest of the month, the June average would be 4.17%, down 7.2% from May, and taking 0.26% out of month-to-month CPI inflation.

Now, since the monthly inflation rate in June 2025 was 0.25%, year-over-year CPI inflation will fall between May and June, unless all other prices rise by more than 0.52% for the month, which is well above the current inflation trend. Thereafter, inflation could drift down further, under some key assumptions.

The most important of these is that the interim peace deal announced with the United States and Iran on Sunday results in a resumption of a free flow of traffic through the Strait of Hormuz. Difficulties remain, including still-to-be-conducted negotiations on Iran's nuclear capabilities and the willingness of Israel and Hezbollah to refrain from hostilities in Lebanon. However, both the United States and Iran have a strong reason to try to reopen the Strait and keep it open.

On the U.S. side, the free flow of oil and other key exports in the region should reduce inflation ahead of the midterm elections. The Iranian regime also clearly has an incentive to sustain a solution that allows it to export oil more freely and eliminates the risk of U.S. attacks. Of course, even...

The Inflation Outlook and Fed Policy under New Leadership

Transcript

Built for investment professionals

Every day you wait, your competitors are finding
edge in conversations you're not hearing.

The Inflation Outlook and Fed Policy under New Leadership

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.