Inflation rises 3.3% in May, less than expected

Inflation slowed more than expected in May Federal Reserve Prices remained uncomfortably high for millions of Americans.

The Department of Labour said on Wednesday that the Consumer Price Index, a broad gauge of the cost of everyday items like gasoline, food and rent, was unchanged in May from the previous month. Prices were 3.3% higher than the same period last year. Both figures were lower than the 0.1% and 3.4% month-on-month increases predicted by economists at LSEG.

Another measure of underlying inflationary pressures in the economy also eased last month. So-called core prices, which strip out volatile measures like gasoline and food to give a more accurate gauge of rising prices, rose 0.2% in May. That was up 3.4% from the same period last year and the lowest since 2021.

Overall, the report suggests that inflation is loosening its grip on the U.S. economy, though prices remain well above the Fed’s 2% target.

The weaker-than-expected report came just hours before the Fed was due to announce its latest interest rate decision. Investors expect the central bank to keep interest rates at their highest in 23 years, but it is expected to announce its quarterly economic forecast updates and Federal Reserve Chairman Jerome PowellThe post-meeting press conference will be important for clues as to where monetary policy will be headed this year.

The news raised expectations that the central bank could cut interest rates as early as September, sending stock futures soaring and bond yields falling on Wednesday morning.

High inflation Severe financial pressures Most American households face high costs for everyday necessities like food and rent, and rising prices are especially devastating for lower-income Americans, who tend to spend more of their already tight paychecks on essentials and therefore have less flexibility to save.

Housing costs remained the largest driver of inflation last month, accounting for more than two-thirds of the total monthly increase, according to the report. Rents rose 0.4% for the month, and are 5.3% higher than the same period last year. Rent increases were driven by: Rising housing costs It has the most direct and serious impact on household finances.

The rise in rents helped offset the sharp drop in gasoline prices, which fell 3.6% during May – their first drop since January.

Consumers also noticed an increase in food prices, one of the most immediate influences on inflation for many households, which increased 0.1% over the month. Grocery prices were unchanged in May, while the price of eating out increased 0.4%.

“Food prices, the main issue, increased slightly, but food prices at grocery stores remained flat,” said Robert Frick, corporate economist at Navy Federal Credit Union. “There was some relief at the gas pump, but unfortunately home and apartment prices continue to rise and remain the main driver of inflation. We won’t see a meaningful decline in the CPI until we see the long-awaited decline in housing costs.”

This is a developing story, please check back for updates.