Consumer Price Growth Slows in May

Consumer prices accelerated at a slower pace in May than the previous month, matching analysts’ expectations while core prices were unchanged and came in shy of predictions.

Inflation rose 0.1% last month after a 0.3% advance in April, the US Bureau of Labor Statistics said on Wednesday. Analysts polled by Econoday were looking for a 0.1% print in the headline number. Year-on-year, CPI rose 1.8%, slower than April’s 2% pace and against expectations for 1.9%.

Food prices rose 0.3% in May after a 0.1% contraction in the previous month, while energy swung to a 0.6% decrease from a 2.9% rise in April as gasoline, natural gas and electricity measures all declined.

Stripping out food and energy, inflation rose 0.1% in May, matching the April print but missing the Econoday projection for 0.2%. Annually, core prices rose 2%, down from 2.1% a month earlier and also shy of predictions for another 2.1% reading.

“Today’s inflation report keeps the Fed’s options open,” said Josh Nye, senior economist at Toronto-based RBC. “With the US economy showing few signs of inflation pressure (at least from a consumer price standpoint), the central bank has leeway to respond to any slowdown in growth cause by tariffs and trade policy uncertainty.”

The probability that the Federal Reserve will keep the target range for its benchmark lending rate on hold at 2.25% to 2.5% this month stands at about 78% currently, according to the CME Group’s FedWatch tool. But for July, the chance of a 25 basis-point cut stands at 67%, up from 57% a week ago and just 17% a month ago.

“A fourth-straight low core print will have the Fed seriously question achieving its inflation target, especially if the trade war heats up and chips away at economic growth,” said Sal Guatieri with BMO Capital Markets.

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