New federal data released Friday showed the Federal Reserve’s preferred inflation measure was flat in May.
According to the Commerce Department’s personal consumption expenditures (PCE) price index, inflation rose 0% in May and 2.6% year-on-year.
“Core” PCE inflation, which excludes more volatile food and energy prices, fell to just 0.1% in April and May, and to 2.6% year-on-year.
Inflation remained steady last month despite increases in consumer spending and incomes. Disposable income rose 0.5% in May and consumer spending rose 0.2% from a revised 0.1% in April.
The latest inflation figures come amid a protracted battle by central banks to further rein in once-ferocious price growth and growing political pressure over the economy and inflation as the November election approaches.
During the first presidential debate on Thursday night, former President Trump claimed that President Biden “created inflation” and said there had been “no inflation” under Biden’s administration.
The pandemic has disrupted decades of low inflation, which was at 1.4% year-over-year when Biden took office in January 2021. Inflation peaked at 9.1% in June 2022 but has since fallen, hitting 3.3% year-over-year in May, according to the Labor Department’s latest Consumer Price Index (CPI).
But several factors are at work contributing to a price surge not seen since the 1980s, including massive supply chain disruptions caused by the pandemic and Russia’s invasion of Ukraine, which hit energy prices especially hard. The reopening of the economy after the pandemic and subsequent spending from stimulus packages enacted under both administrations helped the economy boom.
The Federal Reserve has raised interest rates to 23-year highs, inflating borrowing costs, to cool the economy. The Fed had signaled a cut in interest rates at the end of 2023, when inflation was falling sharply, but the timeline for a possible cut has been extended as inflation measures have flattened.
A majority of interest rate traders expect the Fed to not start cutting rates until at least September, according to the CME FedWatch tool.
Updated at 8:48 a.m. ET.
