Unexpectedly, US consumer prices remained unchanged in May due to cheaper gasoline, though inflation may still be too high for the Federal Reserve to consider interest rate cuts before September, given the robust labor market. The Consumer Price Index, reported by the Labor Department’s Bureau of Labor Statistics, showed no change, following a 0.3% increase in April. This trend downwards from solid readings in February and March could persist as major retailers like Target slash prices across various goods to attract inflation-weary consumers.

In the twelve months leading up to May, the CPI rose by 3.3%, a slight decrease from April’s 3.4%. Despite this moderation from its peak of 9.1% in June 2022, inflation remains above the Federal Reserve’s 2% target. May saw accelerated job growth and increased wages, but the unemployment rate also rose to 4%, as reported by the government the previous week. It is expected that the Fed will maintain its benchmark overnight interest rate within the current 5.25%-5.50% range, where it has stood since July. Having increased its policy rate by 525 basis points since March 2022, the Fed is anticipated to commence an easing cycle in September, although confidence in this timeline is diminishing. While some economists anticipate a rate cut in December, uncertainty surrounds whether borrowing costs will decrease this year.

Excluding the volatile food and energy components, the CPI rose by 0.2% in May, following a 0.3% increase in April.

US Consumer Prices Stagnate in May Amid Cheaper Gasoline, Delaying Potential Fed Interest Rate Cuts