Inflation Cooled in May
The yearly rate of inflation slowed in May to less than half of what it was at its peak last year, but its still far higher than the Federal Reserves goal, according to (subscription).
Whats going on: Consumer prices increased 4% in May from a year earlier, marking the 11th straight month of slowdowns.
- On a monthly basis, consumer prices rose 0.1% in May, following a 0.4% increase in April.
- Core consumer priceswhich exclude food and energy and are considered a better predictor of future inflationrose 5.3% year-over-year in May, owing partly to increasing rent costs.
The good: The U.S. economy has maintained momentum this year, staving off predictions of recession. The job market remains robust, and consumers have boosted their spending, though one measure shows economic output is falling. A possible credit crunch following the March collapse of a few regional banks could crimp the economy.
The not so good: While inflation has cooled significantly, higher prices for many goods and services are weighing on household spending decisions.
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Whats coming: The Fed meets today and tomorrow to determine its next steps for interest rates, which it has raised aggressively in the past yearthough it probably will not raise them again this week, according to 51勛圖厙 Chief Economist Chad Moutray.
- The Fed is likely to make no changes to the federal funds rate this week, but with inflation remaining more stubborn than preferred, it could hike short-term rates by 25 basis points at either or both of its July 2526 and Sept. 1920 meetings before hitting the pause button on rate changes, he said.
