Inflation is slowing again to 4% – the lowest level in more than two years

Inflation in the US has slowed to 4 percent year on year, the lowest rate of price increases since March 2021, when inflation was at a low of 2.6 percent.

The most recent statistics released on Tuesday by the US Labor Department show that inflation rose just 0.1 percent between April and May — after rising 0.4 percent last month.

The annual inflation rate of 4 percent is well below the peak of 9.1 percent last June and lower than the 4.9 percent increase in April.

It comes just before Federal Reserve officials begin their two-day policy meeting to decide on their next steps to cool inflation, which they would like to see at 2 percent.

This downward trend bolsters hopes that the Fed will refrain from a rate hike this week, leaving rates unchanged after 10 consecutive moves since March 2022.

So-called core consumer prices, which exclude volatile items such as food and energy, rose another 0.4 percent in May – the same pace as in April. Compared to this time last year, core prices have risen by 5.3 percent.

Traders’ bets rose this week after data was released for a pause in the rate hike.

At 8:33 a.m. ET, Dow e-minis were up 24 points, or 0.07 percent, S&P 500 e-minis were up 11.25 points, or 0.26 percent, and Nasdaq 100 e-minis were up 89.75 points, or 0. up 61 percent.

May’s rise in inflation was driven primarily by rising house prices, along with rising prices for used vehicles and food, the Labor Department said.

Energy prices, on the other hand, fell 3.6 percent in May from April – and were down 11.7 percent year-on-year.

The cost of gasoline fell 19.7 percent between May 2022 and May 2023, providing some relief to motorists hit by rising energy prices in the aftermath of Ukraine’s war.

All in all, the food index rose by 0.2 percent in May and by 6.7 percent in the past 12 months.

The price of daily necessities such as flour and breakfast cereal rose by 17.1 percent and 8.5 percent, respectively.

However, the cost of eggs fell by 0.4 percent last year. And in May alone, the egg index fell a massive 13.8 percent — the biggest increase since January 1951.

Meanwhile, airline fares fell 13.4 percent year-on-year, while public transportation costs fell 8.9 percent.

Last month, Federal Reserve Governor Philip Jefferson indicated that the central bank is inclined to keep interest rates stable at this month’s meeting to give policymakers more time to assess the economic outlook and how higher borrowing rates will affect inflation. to delay.

It comes after aggressive tightening by the Fed over the past 15 months, a 5 percentage point hike in interest rates, and turmoil among US regional banks earlier this year.

However, Jefferson stressed that a lull in June “should not be interpreted as a sign that we have reached the peak for this cycle.”

Analysts predict the Fed could raise rates again in July if progress is not enough to dampen one of the most severe inflationary bouts in decades.

More to follow.