Inflation eases slightly ahead of the Federal Reserve’s interest rate decision

May’s consumer price index report

May’s consumer price index report


Inflation cooled a bit in May — with cheaper gasoline helping to keep a lid on consumer prices — offering the Federal Reserve some breathing room as it debates cutting interest rates amid a stubbornly robust jobs market.

Consumer prices were up 3.3% last month from May 2023, according to data issued by the Department of Labor on Wednesday. Economists expected the reading to come in at 3.4%, or unchanged from April’s pace, according to FactSet.

The so-called core consumer price index, which excludes volatile food and energy costs, increased 0.2% from April — the lowest since September 2021. 

The key report on consumer prices lands on the last day of a two-day policy meeting by the Federal Reserve, with most economists predicting the central bank will hold its benchmark rate steady as it awaits further data showing inflation coming down towards its 2% target. The rate decision is scheduled to be released at 2 p.m. Eastern.

“This was unequivocally a good report, a delightful appetizer while we await the main course later on today,” Olu Sonola, head of U.S. economic research at Fitch Ratings, said in an email. 

U.S. labor market is resilient despite inflation concerns


Wall Street cheered the data, with the S&P 500 pushing deeper into record terrain after rising more than 1% in morning trade. CPI has been trending lower, with major retailers cutting prices on a broad array of goods to entice inflation-wary shoppers. 

Still, while the yearly rise in consumer prices has moderated from a high of 9.1% in mid-2022, inflation is still running ahead of the Fed’s 2% annual target as well as robust job and wage growth. As a result, many analysts do not expect Fed rate cuts before September at the earliest.

“While the door to an interest rate cut in July is effectively shut, the window still looks open for later on this year,” Sonola at Fitch said.

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