For four months many economists have predicted that US inflation would reignite, in large part due to President Donald Trump’s trade war and the knock-on effects his tariffs would have on the economy. But for a fourth month in a row, data released by the Trump administration’s Bureau of Labor Statistics came in lower than expected. The consumer price index, excluding the often volatile food and energy categories, increased only 0.1% from April, according to government data.

The string of below-forecast inflation readings could be attributable to how many of the administration’s threatened levies are on hold. (In early April, Trump’s “reciprocal” tariffs managed to destabilize the bond market before he largely retreated.) Treasury Secretary Scott Bessent, who is being floated as a potential replacement for Jerome Powell at the Federal Reserve, credited Trump’s trade policies for slowing inflation, saying he challenged a “decades-old status quo.”

However, prices for groceries rose 0.3% after declining in April and retailers like Walmart and Target have warned of higher prices, as have carmakers including Ford and Subaru. A Fed survey of economic activity last week showed prices advanced at a “moderate” pace across the US in recent weeks, with some regions expecting future increases to be “strong, significant or substantial.” —David E. Rovella

What You Need to Know Today

America’s debt burden and interest expense have become “untenable,” a situation that may lead investors to move out of dollar-based assets, according to DoubleLine Capital’s Jeffrey Gundlach. “There’s an awareness now that the long-term Treasury bond is not a legitimate flight-to-quality asset,” the veteran bond manager said Wednesday in an interview at the Bloomberg Global Credit Forum in Los Angeles. A “reckoning is coming.”

In a wide-ranging discussion that also touched on gold’s attractiveness, stretched market valuations, the state of private credit, artificial intelligence and long-term investment opportunities in India, Gundlach said investors should be considering non-dollar-based holdings, adding that his firm was starting to introduce foreign currencies into its funds.

Calling Trump’s accelerating militarization of the government response to mostly peaceful protests in Los Angeles an “unmistakable step toward authoritarianism,” California Governor Gavin Newsom warned in a prime-time speech Tuesday that “democracy is under assault right before our eyes. This moment we have feared has arrived.”

Newsom, a leading potential Democratic candidate for president in 2028 who Trump has threatened with arrest, said the 78-year-old Republican will seek to bend other states to his will and threatens America’s wavering system of government. Protests against Trump have spread across the country, with more planned through the weekend.

Undeterred, Trump, who pardoned hundreds of his followers for their roles in the deadly Jan. 6, 2021, attack on the US Capitol, made a thinly veiled threat of violence against Americans who come out to protest his coming military parade in Washington (which coincides with his 79th birthday). Also, Trump’s attorney general and defense secretary threatened to federalize local prosecutions and increase domestic use of the military, respectively. And finally, members of the US military are not only assisting federal security agents on immigration raids in Los Angeles, but they are now themselves detaining Americans citizens.  

Tanks arrive in Maryland on June 9 ahead of a planned parade in Washington. Photographer: Jim Watson/Getty Images

Apollo Global Management told prospective investment-banking candidates that it won’t interview or extend offers to the class of 2027 this year, following a backlash from banks over young recruits accepting future-dated offers. In a letter sent to candidates on Wednesday, Apollo explained its decision by saying it believes graduates should take time early in their careers and deepen their understanding of business.

Apollo Chief Executive Officer Marc Rowan said he agreed with recent criticisms that the process for hiring young recruits had started too early. “Hiring decisions at Apollo are among the most significant to our business,” David Sambur, co-head of private equity and Nicole Bonsignore, head of human capital, wrote in the letter seen by Bloomberg. “With that in mind, we will not formally interview and extend offers this year for the class of 2027.”

Paul Tudor Jones sees the US dollar dropping over the next year as short-term interest rates fall sharply, he said. Jones, who founded the $16 billion macro hedge fund Tudor Investment Corp., said the dollar may be 10% lower a year from now as the yield curve steepens. “You know that we are going to cut short-term rates dramatically in the next year,” Jones said Wednesday in an interview with Bloomberg TV. “And you know that the dollar will probably be lower because of it. A lot lower because of it.”

Republican senators are considering placing a $30,000 cap on the state and local tax deduction as a compromise between current law and the more generous limit in the House’s version of the massive GOP tax bill. Senator Thom Tillis said his fellow Republican senators are trying to reduce the House-passed $40,000 SALT limit to at least $30,000.

Senators are also considering revising a levy on foreign investors, which has become known as the Section 899 “revenge tax.” That has sparked fears on Wall Street that it could make it difficult for foreign companies and individuals to invest in the US. Investors also fear the tax bill as a whole—specifically its projected multitrillion-cost to the US budget.

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