Inflation eases in May as Consumer Price Index shows no increase

Inflation holds steady: ©Tiko - stock.adobe.com

The Consumer Price Index showed no increase for the month of May, signaling a slight loosening of inflation's stubborn grip, according to the most recent Labor Department report.

The CPI, a key inflation measure that tracks the cost of a diverse array of goods and services, remained flat on a monthly basis, though it marked a 3.3% rise from a year ago. Economists had anticipated a 0.1% monthly gain and a 3.4% annual rate.

When excluding the more volatile food and energy prices, the core CPI increased by 0.2% for the month and 3.4% from a year ago. These figures also came in lower than the expected 0.3% monthly and 3.5% annual increases.

Medical care increased 0.3% in May, and 3.1% in the last 12 months. Medical care commodities increased 1.3% in May, and 3.1% in the last 12 months.

Despite the overall lower inflation numbers, shelter costs continued to exert upward pressure, rising 0.4% for the month and 5.4% annually. Shelter inflation, a significant component of the CPI, remains a primary concern for the Federal Reserve in its ongoing battle against inflation.

Energy prices contributed to the restrained inflation, with the energy index falling by 2%, and gas prices specifically dropping by 3.6%. The food index saw a minor increase of just 0.1%. Meanwhile, motor vehicle insurance prices, another problematic inflation factor, declined by 0.1% for the month but remained over 20% higher than a year ago.

What this means for interest rates remains to be seen. Market expectations have been volatile, and Fed officials have emphasized the need for more consistent positive data before making any moves to ease policy, with interest rates remaining steady since July 2023. During the March meeting, FOMC members suggested potential rate cuts totaling 0.75 percentage points over the year but may revise this projection to one or two cuts based on current data.