Average prices on U.S. consumer goods and services are still on the rise but annual inflation ticked down to 3.3% in May, according to the latest federal data.

Wednesday’s Consumer Price Index report from the U.S. Labor Department finds overall annual inflation eased slightly from April’s 3.4% rate but some categories continue to track up at a much faster pace, including housing-related costs which rose .4% month-over-month in May and are up 5.4% from a year ago. Prices on food purchased away from home also moved up .4% last month and are 4% higher than this time last year. Grocery prices held steady on a monthly basis in May and were 1% more expensive than 12 months ago.

Core CPI, a measure that excludes volatile food and energy prices, ticked up .2% from April to May, finishing the month at 3.4%.

Helping to offset still-hot inflationary pressures in some areas of consumer spending were easing costs for gasoline, which dropped 3.6% from April to May and were 2.2% higher than this time last year and a 2% decline in overall energy prices on a monthly basis.

The May measures for both overall inflation and core inflation came in lower than most economists were expecting.

“Finally, some positive surprises as both headline and core inflation beat forecasts,” Robert Frick, corporate economist with Navy Federal Credit Union, told CNBC. “There was relief at the pump, but unfortunately home and apartment costs continue to rise and remain the main cause of inflation. Until those shelter costs begin their long-awaited fall, we won’t see major drops in CPI.”

Will the Fed follow EU’s interest rate cut?

Will the Fed lower interest rates?

The new data arrives on the same day the Federal Reserve’s rate-setting Open Market Committee wraps up its June meeting. The committee is expected to stand pat on its current federal funds range rate of 5.25% to 5.5%, but the May inflation data is likely to drive further optimism about a downward rate adjustment coming as early as September.

The CPI reading follows the latest Personal Consumption Expenditure report from the U.S. Department of Commerce, released late last month, that found inflation still inched up from March to April but was the smallest monthly increase so far this year and annual inflation held steady.

The core PCE index is the Fed’s preferred metric when it comes to how the monetary body assesses inflationary impacts.


Near the end of last year, Federal Reserve Chairman Jerome Powell was sounding optimistic about the direction of the U.S. economy and signaled 2024 could see a series of downward adjustments to the monetary body’s benchmark federal funds rate.

But that rosy glow faded somewhat as the first months of the year saw inflation bucking a steady downward trend that was in play for most of 2023 and was instead back on the rise.

And at the conclusion of the Fed’s May policy meeting, Powell said that inflationary persistence helped push the body’s Open Market Committee to support the pause on adjusting a rate range that has been in play since last July and is the highest in over 20 years.

Most economists expect the Fed’s rate-setting body will continue to hold on current rates at the conclusion of its two-day meeting Wednesday.

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