Thursday, July 25, 2024

US Consumer Prices Remain Steady in May as Inflation Pressures Ease

US Consumer Prices Remain Steady in May as Inflation Pressures Ease! U.S. consumer prices were unchanged in May, a surprising move as falling fuel prices offset rising rents. However, given the continued tightness of the labour market, the Federal Reserve still believes inflation is too high to consider cutting interest rates before September.

Wednesday’s Labor Department report showed an easing of underlying inflationary pressures for the month. This news affected financial markets by raising the possibility of the Federal Reserve cutting interest rates in September and December. The news of rapid job growth last week in May had tempered this sentiment.

Federal Reserve officials expect benchmark overnight interest rates to be maintained in the current 5.25%–5.50% range, a level that has been in place since July “We don’t know if the Fed has made a soft landing yet.” 

Analysis Of The US Consumer Price Index

The Consumer Price Index (CPI) was unchanged in May after rising 0.3% in April, the weakest reading since July 2022. The CPI is falling after strong gains in February and March And Economists expect it to rise slightly, by 0.1%, in May This trend could continue under pricing pressure as Target and other major retailers cut prices on a range of products to attract shoppers weary of price movements in the sky.

Inflation has negatively impacted American sentiment about the economy, which continues to improve despite the Fed’s tighter monetary policy in 2022 and 2023. This economic resilience is primarily due to a strong labour market.

Oil prices fell 3.6% in May after rising 2.8% in April. Food prices rose 0.1% after the changes in April, while supermarket prices remained firm amid a 1.3% fall in milk prices. Prices of non-alcoholic beverages also fell, while prices of fruits and vegetables were unchanged.

Limit to Core Inflation

In line with April’s increase, the cost of rent rose 0.4%. For the 12 months in May, the CPI advanced 3.3%, down slightly from the 3.4% peak in April. Although annual growth in consumer prices has slowed from a peak of 9.1% in June 2022, inflation remains above the Fed’s 2% target.

Beginning in March 2022, the Fed raised its policy rate by 525 basis points. After the release of CPI data, short-term interest rate futures showed a 70% chance of a rate cut in September, up from an earlier 54% probability Traders also increased betting on a second rate cut at In December. Some economists are predicting a rate cut in December, while others remain uncertain about the start of the Fed’s easing cycle this year.

U.S. stock markets opened higher after the report, the dollar weakened against a basket of currencies and the U.S. currency fell. The bank’s yield decreased. Excluding volatility in the food and energy sector, the core CPI rose 0.2% in May, a small gain from last October after a 0.3% rise in April

Owner’s equivalent rent (OER), which is a measure of what homeowners will pay to rent or earn from buying their property, rose 0.4% sequentially in the third month below market rents, watch expected to show up in CPI data later this year. “Most market mortgages have yet to catch up with the CPI due to the recession, and if the rest of the seasonal analysis is correct, inflation, in particular, is poised to slow significantly in the closing half of the year.” on the two,” said senior financial adviser Conrad DiQuadros at the Brean Capital.

Healthcare spending rose 0.5%, and drug prices rose 2.1%. Hospital service charges rose 0.5%, but service prices for physicians remained unchanged. Used car and truck prices recovered 0.6% after falling 1.4% in April. Education and service fees rose, but airfares fell 3.6% after falling 0.8% in April.

New cars, telecommunications services, hobby clothes, household goods, and usage depreciate. Car insurance, the main driver of price increases in particular, fell last month. The core CPI rose 3.4% in the 12 months to May, the smallest annual gain since April 2021, after a 3.6% rise in April.

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