U.S. consumer prices barely rose in May as a rebound in the cost of food was offset by cheaper gasoline, pointing to moderate inflation that could increase pressure on the Federal Reserve to cut interest rates this year.
The Labor Department said on Wednesday its consumer price index edged up 0.1% last month. The CPI gained 0.3% in April. In the 12 months through May, the CPI increased 1.8%, slowing from April’s 1.9% gain. Economists polled by Reuters had forecast the CPI would rise 0.1% in May and 1.9% year-on-year.
Excluding the volatile food and energy components, the CPI nudged up 0.1% for the fourth straight month. The so-called core CPI was held down by a sharp decline in the prices of used motor vehicles and trucks as well as medical care products. In the 12 months through May, the so-called core CPI rose 2.0% after advancing 2.1% in April.
A report on Tuesday showing core producer prices advancing solidly for a second consecutive month in May had offered hope for a firmer core CPI reading in May, as well as in the inflation measure tracked by the Fed for monetary policy.
Policymakers from the U.S. central bank are scheduled to meet on June 18-19 against the backdrop of rising trade tensions, slowing growth and a sharp step-down in hiring in May that has led financial markets to price in at least two interest rate cuts by the end of 2019.
Fed Chairman Jerome Powell said last week that the central bank was closely monitoring the implications of the trade war on the economy and would “act as appropriate to sustain the expansion.” A rate cut is not expected next Wednesday.
The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index, increased 1.6% in the year to April after gaining 1.5% in March. Data for May will be released later this month. The core PCE price index has been running below the Fed’s 2% target this year.
Gasoline prices fell 0.5% in May after rising 5.7% in April. Food prices rebounded 0.3% in May after dipping 0.1% in the prior month. Food consumed at home increased 0.3%.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3% in May after rising 0.3% in April.
Health-care costs increased 0.3%, matching April’s rise. But the prices for prescription medication fell 0.2%. Apparel prices were unchanged in May after tumbling 0.8% in the prior month. They had declined for two months in a row after the government introduced a new method and data to calculate apparel prices.
Prices for used motor vehicles and trucks tumbled 1.4%, marking the fourth straight monthly drop. The cost of motor vehicle insurance fell 0.4%, the most since May 2007. There were also decreases in the cost of recreation.
But prices for airline tickets, household furnishings and new vehicles rose last month.