Well the CPI came out today. And even playing by the government’s own rules, the headline rate rose a seasonally-adjusted 0.2 percent in May. More important, from May 2010 to May 2011, CPI rose 3.6 percent.
And the reason Krugman should be a little concerned, is that “core” CPI–which he says is a better indicator of the underlying inertia–rose 0.3 percent in May. [UPDATE: I botched the original extrapolation; fixed.] So if you robotically extrapolate that, it works out to 3.7 percent core inflation per year–almost double the Fed’s ostensible target.
Just to clarify, Krugman wasn’t citing a prediction of negative headline CPI for May, but for June. However, I think the analysis he linked to was way way off for May, so we’ll see what happens for June. And to repeat, I think what’s happening is that Krugman and the Fed guy were expecting tame core CPI, coupled with moderating/falling gas prices.