US CPI Data for May Released: Consumer Price Index rises 3.3% in May vs. 3.4% expected

US CPI Data for May Released: Consumer Price Index rises 3.3% in May vs. 3.4% expected

The US Consumer Price Index for last month was released, showing a 3.3% increase compared to the same month last year. This is the second consecutive month that the rate of increase has fallen below the previous month, somewhat easing concerns about inflation.

Data from the Department of Labor show that in the month-to-month comparison, in May prices remained stable about April, compared to an advance of 0.3% registered in April over March.

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The report is better than expected by analysts, who forecast 0.1% monthly inflation and 3.4% year-on-year price increases, according to the consensus gathered by Market Watch.

Energy prices fell, particularly gasoline. But housing and restaurant prices continued to rise.

Core inflation, which excludes the most volatile food and energy data, also performed better than expected, standing at 0.2% in the month-on-month measurement compared to 0.3% in April over March, and more importantly still, at 3.4% for 12 months in May compared to 3.7% year-on-year in April. The results are also better than expected by the market, which expected data of 0.3% and 3.5% respectively.

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Fed officials are examining inflation from month to month, trying to assess their progress in combating price increases. Even as inflation is generally easing, basic goods like food, rent and health care are much more expensive than they were three years ago, a continuing source of public discontent and a potential threat to President Joe Biden’s re-election bid. Most other indicators suggest that the economy is in good condition: Unemployment is low, hiring is robust and consumers are travelling, visiting restaurants and going to shows.

Inflation changed its downward trend in April, for the first time since January. “Price pressures remain elevated but showed a welcome moderation last month,” summarised Rubeela Farooqi, chief economist at High Frequency Economics. The New York Stock Exchange reacted positively to the inflation data and opened sharply higher this Wednesday. The Dow Jones index gained 0.92% in early operations. The technological Nasdaq and the S&P 500, which reached records on Tuesday, rose 0.89% and 0.86% respectively. “Prices are still too high, but the report published today shows encouraging progress in reducing inflation,” President Joe Biden, who is seeking re-election, welcomed in a statement.

Amid the campaign, Biden accused Republicans of having “a different approach” to the economy consisting of “cutting taxes on the rich and big companies.”

Expectations for the Fed

These figures should comfort the Federal Reserve (Fed, central bank), which will end its June monetary policy meeting at noon this Wednesday, Washington DC time. Federal Reserve Chairman Jerome Powell at a press conference on May 1 in Washington. The data are, in any case, higher than the Fed’s goal of 2% annual inflation. The market expects the agency to keep its interest rates unchanged, in a range of 5.25%-5.50%, the highest in more than 20 years. The central bank increased interest rates to combat inflation: by raising rates, credit becomes more expensive and that discourages consumption and investment, cools the economy, and limits pressures on prices. The market awaits clues on eventual rate cuts this year.

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The PCE inflation index, the one most closely followed by the Fed, remained stable in the 12-month measurement in April, at 2.7%. May data will be known at the end of June.

Complete details on Inflation

In May 2024, U.S. consumer prices remained unchanged, which stability followed a 0.3% rise in April and reflected varied sectoral trends.

Krye drivers include a drop in gasoline price by 3.6% and, an increase in the housing price by 0.4%. This is the fourth consecutive month of increasing the same. If we talk about core inflation, it rose by 0.2% excluding the food and energy price. A huge increase in seen in the house, medical care, and used vehicles, whereas airline fares and new vehicles saw declines. If talk about the yearly, the all-items index rose by 3.3%, which is slightly lower than the previous month’s. This moderation in consumer prices strengthens expectations for potential Federal Reserve interest rate cuts. 

  • Inflation: Remains below the Federal Reserve’s 2% target
  • Core CPI: Excludes food and energy; rose by 0.1%
  • Annual Increase: Core CPI up 2.0% over the last 12 months
  • Energy Prices: Fell by 0.6%
  • Food Prices: Increased by 0.3%
  • Housing Costs: Continued to rise, albeit at a slower pace
  • Economic Growth: Showing signs of slowing
  • Labor Market: Strong but signs of cooling off
  • Federal Reserve Policy Current Stance: Interest rates on hold
  • Market Expectations: Increased likelihood of a rate cut
  • Previous Actions: Four rate hikes in 2018
  • Fed Officials: Mixed signals on the need for immediate rate cuts
  • Investor Sentiment: Optimistic about potential rate cuts
  • Bond Market: Yields on U.S. Treasuries have fallen
  • Stock Market: Positively impacted by rate cut expectations
  • Employment: Unemployment rate at a low 3.6%
  • Manufacturing: Experiencing a slowdown
  • Global Trade: Tensions impacting business confidence and investments
  • Economists: Divided on the necessity and timing of rate cuts
  • Market Analysts: Anticipate at least one rate cut by year-end
  • Trade Tensions: Ongoing issues with China affecting the economic outlook
  • Global Growth: Concerns over slowing growth in major economies

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