June 12, 2026
Inflation returned to the center of the market narrative this week as the May Consumer Price Index (CPI), released June 10, showed headline prices rising 4.2% from a year earlier, the fastest annual pace in roughly three years and the first reading above 4.0% since 2023. The figure landed against the backdrop of the ongoing conflict with Iran, where renewed missile exchanges early in the week briefly tested the April ceasefire and lifted oil before it retreated.
The inflation data drew a clear distinction between energy-driven headline pressure and more contained underlying trends. Headline CPI rose 0.5% on the month while core CPI, which excludes food and energy, advanced just 0.2% (and 2.9% from a year ago), below the 0.3% consensus. Thursday’s May Producer Price Index (PPI) for final demand jumped 1.1% in the month, well above the 0.7% estimate, and 6.5% annually, though core PPI rose a softer 0.4% and 4.9%, respectively. Elsewhere, the preliminary June University of Michigan Sentiment Index improved to 48.9 from 44.8, with one-year inflation expectations easing to 4.6%.
Despite the firm headline inflation prints, Treasury yields ended modestly lower on the week as cooler core readings tempered the most hawkish concerns, and optimism over a resolution to the Middle East conflict also buoyed bond markets. The 2-year U.S. Treasury yield eased approximately 7 basis points to 4.08% and the 10-year fell approximately 5 basis points to 4.48% at the time of this writing. The S&P 500 was little changed on the week, at 7,434, approximately 2% below the record high set in late May. West Texas Intermediate crude oil hovered around $85 per barrel, $5 lower on the week. Gold pulled back to approximately $4,200 per ounce as the dollar firmed.
The Chandler team expects the Federal Open Market Committee to hold the federal funds rate at 3.50% to 3.75% at the June 17 meeting and through our six-month forecast horizon. New Chair Kevin Warsh’s inaugural press conference will be closely watched for how the Committee weighs the energy-driven headline surge against more contained core readings. In addition, market participants will be scrutinizing the Summary of Economic Projections for any material changes.
Next Week (holiday-shortened by the Juneteenth market closure on June 19): Empire Manufacturing, Industrial Production, Capacity Utilization, NAHB Housing Market Index, Housing Starts, Building Permits, Import Price Index, Retail Sales, Business Inventories, Pending Home Sales, Federal Open Market Committee (FOMC) Rate Decision, Summary of Economic Projections, MBA Mortgage Applications, Initial Jobless Claims, Continuing Claims, Philadelphia Fed Business Outlook, Leading Index, TIC Flows.
Written by Daniel Delaney, CFA, Co-Chief Investment Officer