Recent data released by the United States Department of Labor has revealed that United States inflation rate decelerated during the month of May. However, persistent price gains have highlighted the mounting pressure on the Federal Reserve to consider hiking interest rates later this year.
According to the US Bureau of Labor Statistics, the Consumer Price Index (CPI), which is a widely observed indicator of inflation that monitors fluctuations in the prices of common goods and services, increased by 4% in May compared to the previous year.
April’s 4.9% increase was surpassed in the latest report, indicating the smallest monthly growth in over two years. In contrast, inflation had reached its highest point at 9.1% in June of the previous year.
This recent development provides the Federal Reserve with some leeway, as it has been consistently raising rates in ten consecutive adjustments since the beginning of 2022. It gives them an opportunity to consider a much-anticipated pause during their upcoming meeting this week.
The latest report released on Tuesday by the Bureau of Labor Statistics reveals that the core Consumer Price Index (CPI), which excludes the influence of volatile food and energy prices, experienced a worrisome increase of 0.4% compared to the previous month.
Furthermore, when compared to the same period last year, the core CPI recorded a substantial rise of 5.3%. On a month-to-month basis, prices exhibited a moderate increase of 0.1%.
The primary driver of the recent surge in prices was the escalating housing costs, which accounted for the largest proportion of the overall increase in the past month. Additionally, used cars and trucks experienced a notable upswing of 4.4%.
In the realm of stocks, Tuesday witnessed a positive trend, as the Dow surged by 145 points or 0.4%, and the Nasdaq demonstrated an even stronger growth, advancing by 0.8%.
In addition to other indexes that experienced growth in May, the motor vehicle insurance index witnessed a 2.0% increase. Similarly, transportation services, apparel, personal care, and education also saw a rise in their respective indexes.
In May, the food index experienced a slight increase of 0.2% following a period of stability in March and April. Over the course of the past year, the food index showed a significant rise of 6.7%. Conversely, the energy index exhibited a decline of 11.7% over the same one-year period.
Despite the report indicating a reduced year-over-year inflation rate, it remains higher than the Federal Reserve’s targeted 2%. Concurrently, the month witnessed a significant increase of 339,000 jobs in America’s robust job market.
In response to this persistent price surge, the Federal Reserve implemented an assertive measure by raising the benchmark funds rate from 5% to 5.25% last month. This move aims to curb inflation and prevent the onset of a recession.
The central bank indicated that it had concluded its series of interest rate hikes, having recently raised them to their highest level in 16 years.
The upcoming Tuesday’s CPI report carries significant importance in determining the Federal Reserve’s forthcoming rate decision, scheduled to be announced on Wednesday.
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