Inflation cooled more than expected in May, new data showed Wednesday, delivering a welcome piece of news just hours before the Federal Reserve is set to make its latest announcement on interest rates.
Consumer prices rose 3.3% from a year earlier, slowing from April’s 3.4% rate, according to the Bureau of Labor Statistics’ latest Consumer Price Index report released Wednesday.
On a monthly basis, prices were flat, a slower pace from April’s 0.3% gain.
It’s the first time since July 2022 that CPI did not rise on a monthly basis.
“This is the best news we could’ve gotten this morning,” Philip T. Powell, executive director of the Indiana Business Research Center and clinical associate professor at the Indiana University Kelley School of Business, told CNN. “The Federal Reserve has been watching to make sure this [monthly] number came in below 0.2%.”
“If it did, that means inflation is going to come down, which means [the Fed] could lower interest rates,” he added.
Economists were expecting a 0.1% monthly increase and an annual gain of 3.4%, according to FactSet consensus estimates.
Helping to slow inflation in May were falling gas prices, which dropped 3.6% from April. They’re still up 2.2% for the year. Grocery prices were flat and overall food prices went up by 0.1%, lifted by a slight acceleration in inflation at the restaurant level.
However, shelter inflation more than offset the decline in gasoline, rising 0.4% for the fourth month in a row, underscoring the pressure Americans are feeling from housing-related expenses.
Excluding gas and food, categories that tend to be volatile, the closely watched “core” measure rose just 0.2% for the month (its slowest pace since October of last year), and its annual rate dropped to 3.4%, setting a fresh three-year low.
This story is developing and will be updated.
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