• Both headline and core inflation numbers fell short of consensus estimates.
• Gasoline prices fell 0.5% in May, following a 5.7% increase in April. Gas prices could be a deflationary force in coming months.
• May’s mild inflation report leaves the door wide open for the Federal Reserve to begin cuts in short-term interest rates.

This report looks like good news for the stock and bond markets, because it reinforces the Federal Reserve’s likely plan to begin lowering short-term interest rates, possibly twice in 2019. The first cut could come next week, or possibly in July.

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