Data released Wednesday by the Labor Department showed consumer prices did not rise overall in May, with the annual inflation rate lower than expected.
The Consumer Price Index (CPI), a common measure of inflation, was unchanged over the past month and up 3.3% over the past year. Consensus forecasts had expected the CPI to have risen 0.1% in May and to have risen 3.4% over the past year.
The new inflation data was released just hours before the Federal Reserve’s Monetary Policy Committee is due to announce its June interest rate decision. The Federal Open Market Committee starts meeting on Tuesday and is expected to leave interest rates unchanged in the 5.25% to 5% range on Wednesday.
Federal Reserve Chairman Jerome Powell is scheduled to hold a press conference at 2:30 pm EDT. Along with its interest rate decision, the FOMC is also expected to release new forecasts for economic growth, inflation, unemployment, and the Fed’s expected interest rate path.
Inflation is a top concern for voters ahead of the election. pollThe mild May figures would be good news for President Biden, who has been dogged by low approval ratings for his management of the economy.
The Biden administration has launched a campaign against private sector price gouging in recent months after companies used post-pandemic fiscal and monetary stimulus to boost profits to record levels.
Food prices were steady in May, rising just 2.1% from a year earlier, as food prices did not rise month-over-month. Energy prices rose 3.7%.
Housing costs remain high relative to overall inflation, with home prices up 5.4 percent compared to May last year.
Deflation was seen in many areas, with prices of computer software, flooring and window coverings, gasoline, and various food groups falling.
The flat movement in the CPI tracks a similar movement in the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, which fell to 2.75% in April from 2.81% in March.
The figures come on the heels of a strong jobs report that showed an increase of 272,000 jobs in May, according to the Labor Department.
The unemployment rate rose to 4% from 3.9% last month, the highest level since January 2022 but still low by historical standards.
Stabilizing prices in May would be good news for the Fed, which is considering how long to keep interest rates at current levels.
According to financial firm CME’s FedWatch forecasting algorithm, the market was pricing a 60% probability of a September rate cut as of Wednesday morning, while the June and July meetings have strong support for current levels.
Updated at 9:26 a.m. EDT.
