The latest reading of the Fed’s preferred inflation gauge showed inflation declining in May, with prices rising at their slowest pace since March 2021.
The core personal consumption expenditures index, which excludes the cost of food and energy and is closely watched by the Federal Reserve, rose 0.1% in May from the previous month, in line with Wall Street expectations and slower than 0.3%. The increase seen in April.
Core personal consumption expenditures rose 2.6% from a year earlier in May, in line with estimates. May’s reading represents the slowest annual increase in more than three years.
Jennifer Lee, a senior economist at the Bank of Montreal, told Yahoo Finance that May’s inflation reading was “probably the best we could expect.”
“This certainly helps the Fed, [and] “It gives them more comfort on their way to starting to ease policy,” he told me.
The report comes on the heels of other promising inflation readings in May. The latest reading of the Consumer Price Index (CPI) showed that core prices rose 0.2% from the previous month, less than economists had expected.
Read more: Is the inflation fever subsiding? Are the increases in daily expenses finally easing?
But after surprisingly hot inflation readings at the start of the year, Fed officials have remained cautious about the direction of inflation, indicating in their latest policy statement that it would not be appropriate to cut interest rates until they have “greater confidence” in the path of inflation.
“We have made modest progress toward our inflation goal,” Fed Chairman Jerome Powell said at a news conference on June 12. “We will need to see more good data to strengthen our confidence that inflation is moving sustainably toward 2 percent.”
Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_Joshshafer.
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