Consumer inflation in the US cooled for an 11th straight month on an annual basis last month, the US Department of Labor said on Tuesday, in an encouraging sign for policymakers.
The figures came as US Federal Reserve officials began a two-day policy meeting and could allow room for a pause in the central bank’s interest rate hikes at the end of their gathering.
While the Fed has lifted the benchmark lending rate 10 times consecutively since early last year to rein in inflation, it is widely anticipated to hold off on further hikes this week due to signs of cooling in the world’s biggest economy.
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The consumer price index (CPI) in May jumped 4 percent from a year earlier, in line with analyst expectations and down from 4.9 percent in April.
That brings it to the lowest level in about two years, and less than half the peak rate of 9.1 percent in the middle of last year.
On a monthly basis, the CPI rose 0.1 percent, decelerating from 0.4 percent in April, the department said.
Excluding the volatile food and energy components, consumer inflation was up 5.3 percent over the past 12 months.
“The index for shelter was the largest contributor to the monthly all items increase, followed by an increase in the index for used cars and trucks,” the department said.
However, while there was a “leap” in used vehicle prices last month, it was probably the last of a response to an earlier surge in auction prices, Pantheon Macroeconomics Ltd chief economist Ian Shepherdson said.
“CPI used vehicle prices will fall over the summer, likely starting as soon as June,” he said in a note.
Rent growth is also set to slow, he added.
Meanwhile, new vehicle prices dipped on a monthly basis on improving supply and “softer demand in the face of tightening credit conditions,” he said.
“While inflation rates remain elevated, the moderate slowing provides the Fed room to pause its rate hikes,” Nationwide chief economist Kathy Bostjancic said in a note.
For now, halting further rate increases allows the Fed more time to assess the economic effects of its earlier actions, which came on top of recent pressures in the banking sector.
However, when it comes to the future policy path, “incoming information on inflation, the labor market as well as considerations about credit conditions” would determine if the Fed is done raising rates, High Frequency Economics chief US economist Rubeela Farooqi said.
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