US Inflation on Track to Hit Three-Year High in May

RBC Economics expects US inflation to hit a three-year high in May, according to a recent forecast. The bank predicts headline inflation will increase by 0.5% month-over-month in May, bringing the year-over-year pace to 4.2%. Higher energy prices are expected to push headline inflation higher.

Core CPI, which excludes volatile food and energy prices, is also expected to rise 0.3% month-over-month in May, pushing annual core inflation to 2.9%, above the Fed's 2% target.

The research arm of the Royal Bank of Canada notes that businesses appear to have enough pricing power to preserve profit margins, reducing the likelihood of widespread layoffs.