All eyes are on the U.S. Consumer Price Index (CPI) data for May, set to be released on June 11 (ET). This report is more than just a gauge of inflation—it could shape the Federal Reserve’s path on interest rates in the months ahead. Recent tariff hikes on imports from China and other key trading partners are raising fresh questions: Are these policy moves starting to filter through to prices?

In April, CPI rose 2.3% year-over-year—the slowest pace since February 2021—and just 0.2% month-over-month. That fueled hopes that inflation might be cooling. But May is telling a slightly different story. As some new tariffs took effect, prices on certain goods started creeping up again. Durable and personal goods prices rose by 0.53% in May, compared to 0.35% in April. Household products like dishwashers, microwaves, electric razors, and TVs saw monthly jumps ranging from 1.24% to nearly 3%. Analysts point to higher import costs driven by tariffs, with the burden now landing on consumers.

If this CPI data shows any meaningful rebound in inflation, the Fed may have to reconsider its rate-cut timeline. According to the CME FedWatch Tool, expectations for rate cuts have largely shifted to the second half of 2025, with near-term optimism fading. Even if a rate cut materializes later this year, recent inflation data may limit it to a symbolic move, or potentially none at all.

Meanwhile, the job market, though still resilient, is sending some mixed signals. May’s job growth was slightly above forecasts, but the pace slowed compared to April. That could be a sign the labor market is entering a transitional phase. If inflation stays elevated while hiring momentum slows, markets could be staring down the twin risks of a hard landing or even stagflation—a scenario that would weigh heavily on the financial outlook for the rest of the year.

Bottom line: May’s CPI reading will be a critical indicator of how recent trade policy shifts are affecting inflation. It will also offer key clues about the Fed’s next move. For investors and businesses alike, staying alert this week is essential. Market volatility and shifting policies may offer both risks and opportunities—and how you position your portfolio today could make all the difference tomorrow.