US inflation cools in encouraging sign for the Fed: How much did it fall?

A key measure of underlying inflation USA fell for a second month in May, an encouraging surprise for Federal Reserve (Fed) officials looking for signs that they can begin to lower interest rates.

The Consumer Price Index (CPI) of the United States fell one tenth in May to 3.3% compared to April’s data, meaning that the data has been stagnant all year above the Federal Reserve’s 2% objective despite high interest rates.

In the last 12 months, the increase in core inflation, which excludes volatile energy and food prices, was 3.4%, two tenths below the April data, and the lowest data since April 2021.

Compared to April, the increase was 0.2%. Both data are slightly below what was expected by analysts, who are waiting for signals that will give the Federal Reserve reasons for a gradual lowering of interest rates.

Wall Street celebrated the inflation data at first now with increases, but with an eye on the press conference of the president of the Fed, Jerome Powell.

Energy prices rose 3.7% in the past 12 months to May and food prices rose 2.1%.

Prices are still far from the 2% target of the Federal Reserve, which today ends its two-day monthly meeting to determine the progress of monetary policy and with analysts pending on whether the Open Market Committee The issuer considers that there is room for rate cuts this year.

Part of the decrease in the general inflation data was due to a reduction in the cost of gasoline (-3.6% compared to April), while the sections of air travel, new vehicles, communication, recreation and clothing registered reductions with compared to April.

On the increase side, rents stood out, which rose 0.4% compared to April and 5.4% compared to May 2023.

Increases were also recorded in restaurant prices, which also advanced 0.4% compared to April; medical costs (0.3%), used vehicles (0.6%) and education (0.4%).

The American president, Joe Biden, assured in a statement that he understands the difficulties of families due to the cost of living, “which is still very high”, and highlighted that salaries rise above prices.

“Core inflation is at its lowest level since April 2021, food prices have fallen for four months in a row, and the cost of gasoline is below $3.50 (a gallon) on average.“said the president.

Biden’s re-election campaign indicated that these inflation data are another example of the economic improvement during the Democrat’s term.

“Joe Biden inherited an economy on the precipice of Donald Trump and is now leading the great American comeback. Under his leadership wages are rising, inflation is contained and the economy is the strongest in the world.”said campaign spokesman James Singer.

For its part, the Republican Party assured that since Biden took office, prices have increased a cumulative 20%. “The incompetent Biden administration promised inflation would be ‘transitory,’ but it was lying”said the Republican National Committee in a statement.

Although inflation has moderated from the levels of summer 2022, the Federal Reserve continues to try to guide monetary policy so that price increases remain at around 2%.

The Fed, which today is expected to keep rates between 5.25% and 5.5%, hopes to be able to announce quarter-point cuts this year, but persistent inflation and the strength of the labor market and wages do not leave room for that. motion.