While it pales in comparison to the Canadian inflation results, the U.S. Consumer Price Index came in rather strong today, too, but likely not enough to derail rate cuts.

The May CPI headline posted an expectedly large 0.4% gain, largely as the result of a 6% jump in gas prices. The core rate rose just 0.1% though, better than the 0.2% advance for which economists were calling. A slide in tobacco, computer and recreation prices is being credited with the modest core rate rise.

CIBC World Markets remains optimistic on the future trend, noting, “At 3.6% on an annual basis, consumer inflation is back close to its recent highs. But the good news, for both bondholders and wage earners, is that the story should improve from here. Dampening energy pressures, both gasoline and natural gas prices are likely to retreat in coming months in the face of improved supply prospects for both fuel types. With the recent upsurge in jobless claims pointing to a further increase in unemployment, and capacity utilization in manufacturing at 18-year lows. Core inflation should also remain subdued.”

BMO Nesbitt Burns concludes that this will keep the U.S. Federal Reserve Board on an easing track. “This report is consistent with the Fed’s view that inflation is well under control and expected to remain well contained. As a result, the Fed is clear to keep its focus on the economic slowdown, with little threat from the inflation outlook.”

The folks at CIBC World Markets agree, noting, “The milder-than-expected 0.1% rise in core prices increases the chances that the Fed will cut the funds rate by a further 25 bps at the June 26-27 FOMC meeting.”