Morgan Stanley Research previews the US May CPI report on Wednesday.

"We see core CPI at 0.22% m/m (2.8% y/y), slowing from 0.38% m/m in April, driven by deceleration in core services alongside still-positive core goods inflation. The step-down in core is largely explained by easing shelter inflation," MS notes.

"Core goods inflation remains positive-tariff pass-through is not yet complete although its impact is gradually fading. Headline CPI is expected to rise 0.56% m/m and 4.3% y/y, outpacing core on the back of further increases in gasoline prices in May. Absent additional gains in oil prices, headline inflation should begin to trend lower in June. Our forecasts are consistent with core PCE prices rising 0.24% m/m and stalling at 3.3% y/y in May. Headline PCE prices would rise 0.43% m/m and 4.0% y/y," MS adds.