Consumer inflation in the United States cooled for an 11th straight month on an annual basis in May, the US Labor Department said, in an encouraging sign for policymakers.
The consumer-price index rose 0.1% from April, lowering the 12-month change to 4%, from 4.9% in April. So-called core consumer prices, which excludes volatile food and energy categories, climbed 0.4% in May and by 5.3% from a year earlier, down from 5.5% in April.
The data comes as Federal Reserve officials are set to begin a two-day policy meeting, with the figures expected to have a bearing on their interest rate decision at the end of the meeting.
The Labor Department reported Tuesday that overall inflation slowed in May but underlying price pressures remained firm. The figures are likely to keep the Fed on track to forego a rate rise this week following 10 consecutive increases, according to the Wall Street Journal (WSJ).
The WSJ said that policy makers’ new quarterly economic projections, due to be released after their meeting on Wednesday, provide them one way to underscore that they are likely to raise rates more if the economy and inflation dont soon show signs of slowing, the Wall Street Journal added.
Their March projections showed most officials anticipated they would raise their benchmark federal-funds rate to its current level, between 5% and 5.25%, and hold it there through years end so long as growth and inflation slowed. A significant minority thought the rate would need to rise higher, to around 5.5%.
Officials made those projections on March 22 amid heightened uncertainty from the failure of two midsize banks Silicon Valley Bank on March 10 and Signature Bank on March 12. A third ailing lender, First Republic Bank, failed a few weeks later.
Until March, Fed officials had lifted every quarter their estimates of how high they would have to raise rates. But in March, more officials concluded the potential for banks to tighten credit might have the same economic effect as a Fed rate increase. Most held steady their projection of the “peak” rate.
Since then, some Fed policy makers have said they are anxious the economy hasnt responded to rapid rate rises over the past year and want to keep nudging rates higher to ensure growth slows soon.
The bank failures this spring served as an early example of how a lending pullback could unfold with little notice, especially because financial markets grew accustomed to historically low borrowing costs over the past decade.
Policy makers are expected to hold rates steady at their meeting this week, but investors in interest-rate futures markets anticipate another increase is likely at the Fed’s subsequent gathering in July, WSJ added.
Forgoing an increase this week would allow officials to further slow their rate rises to assess the effects of their previous hikes and any fallout from banking industry stress.
Source: Qatar News Agency
