The key inflation measure the Fed uses to track price growth rose 2.6% last month, in line with analysts’ expectations.
Stock market futures rose across the board early Friday as investors expect central banks to cut interest rates later this year.
The personal consumption expenditures index (PCE) is the Fed’s preferred inflation measure.
Economists in the report had expected inflation to ease modestly to 2.6% in May, following 2.7% in April.
This is down from a PCE peak of 7.1% in mid-2022.
Other inflation measures, including the Consumer Price Index, have also eased significantly over the past two years.
Consumer prices, which exclude volatile food and energy prices – the closely watched “core” index – rose 0.2 percent from April to May.
This was down from 0.3% the previous month and the smallest increase since October.
Year-on-year, core prices rose 3.4%, down from last month’s 3.6% increase and the slowest increase in three years.
Groceries costs were unchanged on average from April to May after falling 0.2% from the previous month.
Food prices have risen just 1% over the past 12 months, but are still about 20% higher than they were three years ago.
The average price of gasoline fell 3.6% nationwide from April to May, but is still up 2.2% from a year ago.
The Federal Reserve is aiming for a “soft landing” to bring down inflation without plunging the economy into recession.
The U.S. economy expanded at an annualized pace of 1.4% in January-March, the slowest quarterly growth since the spring of 2022, the government said Thursday, revising slightly upward from its previous forecast.
Consumer spending grew just 1.5 percent, down from an earlier forecast of 2 percent, suggesting that high interest rates may be hurting the economy.
The Commerce Department had previously estimated that gross domestic product – the total production of goods and services – grew 1.3 percent last quarter.
First-quarter GDP growth marked a sharp retreat from a robust pace of 3.4% in the final three months of 2023.
Still, Thursday’s report showed that the January-March slowdown was driven mainly by two factors — a surge in imports and a decline in business inventories — which fluctuate from quarter to quarter and do not necessarily reflect the underlying health of the economy.
Imports dragged down growth by 0.82 percentage points in the first quarter, while a decline in inventories contributed 0.42 percentage points to the decline.
The shortfall was made up by business investment, which the government said rose 4.4 percent in the last quarter from a year earlier, up from a previous forecast of 3.2 percent.
The increase was driven by rising investment in factories and other nonresidential buildings, as well as software and other intellectual property.
With post wire
