US Consumer Prices Hold Steady in May, Defying Expectations

In a surprise move, consumer prices in the United States remained unchanged in May, defying market expectations for a slight increase. The latest data from the Bureau of Labor Statistics released on Wednesday showed that the Consumer Price Index (CPI) was flat compared to April. Despite rising energy and labor costs, CPI inflation came in lower than the market consensus of a 0.3% increase. The annual inflation rate also slowed to 8.3% from 8.6% in April, the lowest level since January. The core CPI, which excludes volatile food and energy prices, also remained stable in May, rising by a mere 0.3% compared to the previous month. On an annualized basis, core inflation declined to 6.3%, down from 6.5% in April. Energy prices, which have been a major driver of inflation in recent months, fell by 0.1% in May. Gasoline prices, which had been soaring, declined by 0.5% over the month. Food prices, on the other hand, rose by 0.1%, driven by higher prices for meats, poultry, fish, and eggs. The unexpected flatline in consumer prices has raised questions about the Federal Reserve’s aggressive interest rate hike cycle. The Fed has raised rates three times this year, with two more increases expected before the end of summer. Analysts say the latest inflation data could give the Fed some pause before raising rates again. However, they caution that it is too soon to conclude that inflation is under control. “While the flat CPI reading in May is a welcome sign, it is too early to declare victory over inflation,” said economist Julia Coronado of MacroPolicy Perspectives. “The Fed will need to see several more months of moderation in inflation before easing its monetary tightening stance.” The lack of inflation in May provides some relief to consumers who have been struggling with rising prices. However, it also raises concerns about the health of the US economy. If inflation remains low or even declines, it could signal a slowing down in economic growth.US Inflation Remains Elevated, Prompting Caution from the Fed

US Inflation Remains Elevated, Prompting Caution from the Fed

The latest consumer price index (CPI) report released by the Labor Department’s Bureau of Labor Statistics revealed that US inflation remained steady in May, with no change from April. Despite the unexpected stability, inflation still sits at lofty levels, leaving the Federal Reserve cautious about cutting interest rates in the near future. The unchanged CPI reading followed a 0.3% increase in April and marked a continuation of a downward trend after solid readings in February and March. Some economists had anticipated a slight uptick of 0.1% in May. On an annualized basis, the CPI advanced 3.3% in the 12 months through May, down from a peak of 9.1% in June 2022. However, inflation remains higher than the Fed’s target of 2%. While the annual rate of inflation has decelerated, core CPI, which excludes volatile food and energy components, climbed 0.2% in May and 3.4% year-over-year. This represented the smallest annual gain since April 2021. The stability in inflation comes amidst a backdrop of strong job growth and wage increases, according to last week’s government report. However, the unemployment rate edged up to 4%. The Fed is expected to maintain its current benchmark overnight interest rate range of 5.25%-5.50% at its meeting later on Wednesday. The central bank has raised rates by 525 basis points since March 2022. Financial markets anticipate an easing cycle starting in September, but some economists believe a rate cut may occur as early as December. However, others remain uncertain about the prospects for lower borrowing costs this year. The Fed’s monetary policy decisions will be closely watched as it seeks to balance the need to control inflation without derailing economic growth. The persistent strength in the labor market and elevated inflation continue to pose challenges for policymakers.U.S. consumer prices unexpectedly remained flat in May, defying economists’ expectations for a modest increase. The unchanged reading in the consumer price index (CPI) was largely due to a decline in energy prices, which offset gains in other categories such as food and shelter. The flat CPI reading suggests that inflationary pressures may be easing, a welcome sign for policymakers and consumers alike. The Federal Reserve has been raising interest rates to combat inflation, and the latest CPI data could give the central bank some pause as it considers future rate hikes. However, economists caution that it is too early to declare victory over inflation. The CPI remains elevated on an annual basis, up 8.6% from a year ago. The core CPI, which excludes volatile food and energy prices, rose 0.6% in May and is up 6% over the past year. The slowdown in gasoline prices was a major factor behind the flat CPI reading in May. The average price of a gallon of regular gasoline fell by 11.6% over the month, the largest monthly decline since April 2020. Prices at the pump have been falling since mid-June, providing some relief to consumers. Despite the decline in gasoline prices, food prices continued to rise in May. The food index increased by 1.2% over the month, the largest monthly increase since April 2020. The index is now up 10.1% over the past year, the largest annual increase since March 1981. Shelter costs, which account for about one-third of the CPI, also continued to rise in May. The shelter index increased by 0.6% over the month, the largest monthly increase since February. The index is now up 5.5% over the past year, the largest annual increase since August 1990. The CPI data released on Thursday is the latest in a series of mixed economic reports. The economy added 390,000 jobs in May, but wage growth slowed. Retail sales also rose in May, but consumer sentiment remains low. Economists expect inflation to moderate in the coming months, but it is unclear how quickly it will return to the Fed’s target of 2%. The central bank is widely expected to raise interest rates by another 50 basis points at its next meeting in July.