In a noteworthy development, the rate of inflation in the United States experienced yet another deceleration in May, potentially providing support for the Federal Reserve to consider a pause in its ongoing campaign to tighten monetary policy. According to data released on Tuesday by the Bureau of Labor Statistics, the country's consumer price index (CPI) rose by 4.0% on an annual basis, down from the 4.9% recorded in April. This figure came in just slightly below economists' projections, which had anticipated a cooling to 4.1%.
May marked the eleventh consecutive month in which headline inflation eased, and the recorded rate represented the slowest increase in two years. However, it is important to note that the figure remains twice the Federal Reserve's targeted rate of 2%. On a month-on-month basis, the CPI reading inched up by only 0.1%, a significant deceleration compared to the 0.4% growth observed in the preceding month.
In terms of core prices, which exclude more volatile components such as food and energy, the annual increase stood at 5.3%, aligning with estimates. The monthly growth rate for core prices mirrored the annual trend, registering a modest 0.4%.
These latest inflation figures hold potential significance for Federal Reserve policymakers as they convene for a crucial two-day meeting commencing today. Over the past year, the Fed has steadily raised interest rates in an effort to combat heightened inflationary pressures. Consequently, the CPI data will likely play a pivotal role in the central bank's decision-making process, influencing whether they will temporarily halt the current cycle of tightening or proceed with further increases in borrowing costs.
