Inflation in the US continued to steadily decline last month, with consumer prices increasing by just 0.1% from April to May. However, several indicators of underlying pricing pressures continued to be significant. Gasoline price declines, a far slower increase in food prices than in prior months, and lower prices for furnishings, airfare, and appliances all contributed to the downturn.
Inflation, as measured year over year, dropped to barely 4% in May, the lowest 12-month result in more than two years and far less than the 4.9% annual increase in April.
Gas prices decreased 5.6% from April to May after being seasonally adjusted; they have decreased by over 20% since last year.
The cost of renting an apartment was high and used automobile prices increased for the second time in a row last month, up 4.4% merely from April to May. On the other side, used car wholesale prices dropped last month, which would portend lower used car retail pricing going forward.
Core prices increased by 0.4% in May compared to April, marking the sixth consecutive month of increases at that level or higher. Core inflation decreased from 5.5% to 5.3% as compared to a year ago. That is still much above the Fed’s 2% objective.
The release of Tuesday’s inflation data coincides with the start of a crucial two-day meeting of the Federal Reserve, following which it is anticipated that rates will remain unchanged after 10 consecutive increases dating back to March 2022. The central bank will probably forego a rate hike on Wednesday, but it might give a signal that it will start doing so as early as July. Top Fed officials have indicated that they are leaning toward a so-called “skip” to give themselves time to evaluate the impact of their rate hikes on inflation and the general economy.
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