US consumer prices were unexpectedly unchanged in May, thanks to cheaper gasoline, but inflation likely remains too high for the Federal Reserve to start cutting interest rates before September, against the backdrop of a of persistently strong work.
The unchanged reading of the consumer price index, reported Wednesday by the Labor Department’s Bureau of Labor Statistics, followed a 0.3% increase recorded in April.
The CPI has been trending lower after posting solid readings in February and March. Pricing pressures could continue to moderate as major retailers including Target cut prices on goods ranging from food to diapers, trying to lure inflation-weary consumers.
In the 12 months to May, the CPI rose 3.3% following a 3.4% rise in April. Economists polled by Reuters had expected the CPI to rise 0.1% and rise 3.4% year-on-year.
Although annual consumer price growth has slowed from a peak of 9.1% in June 2022, inflation continues to run above the U.S. Central Bank’s 2% target.
Job growth accelerated in May and wages rose, but the unemployment rate rose to 4%, the government reported last week. Fed officials are expected to leave the central bank’s benchmark overnight interest rate unchanged in the current range of 5.25%-5.50%, where it has been since July.
The Fed has increased its key rate by 525 basis points since March 2022.
Financial markets expect the Fed to begin its easing cycle in September, although this belief is waning. Some economists are leaning toward a rate cut in December, but others aren’t so sure borrowing costs will be lowered this year.
Excluding volatile food and energy components, the CPI rose 0.2% in May, after rising 0.3% in April.
In the 12 months to May, core CPI rose 3.4%. It was the lowest year-over-year gain since April 2021 and followed April’s 3.6% gain. (Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
