(CTN News) – As a result of the labor department’s report on Tuesday, the inflation rate cooled to its lowest level in two years in May.
The consumer price index, which measures changes in a broad range of goods and services, increased just 0.1% for the month, bringing its annual level down to 4%.
The 12-month increase was the smallest since March 2021, when inflation was just beginning to increase to its highest level in 41 years.
When volatile food and energy prices are excluded, the picture is not as optimistic.
The so-called core inflation rate rose 0.4% on the month and 5.3% from a year ago, indicating that even though price pressures have eased somewhat, consumers remain under strain.
The Dow Jones consensus estimate was exactly matched by all of these numbers.
The drop in energy prices of 3.6% contributed to a modest increase in the CPI for the month. Just 0.2% of the increase in food prices was due to inflation.
A 0.6% increase in shelter prices contributed the most to the increase in the all-item, or headline, CPI reading. An estimated one-third of the index’s weight is allocated to housing-related costs.
The price of used vehicles increased by 4.4% in May, the same as in April, while transportation services increased by 0.8%.
In spite of the fact that the release is expected to be an integral part of the Federal Reserve’s interest rate decision at this week’s meeting, the markets did not respond to it. Despite a sharp decline in Treasury yields, stock market futures were slightly positive.
Trading in the fed funds market has notably changed as traders now price in a nearly 100% probability that the Federal Reserve will not raise benchmark interest rates at the conclusion of its meeting on Wednesday.
“The Fed will likely keep rates unchanged this month due to the positive trend in consumer prices, and if this pattern continues, rates won’t likely rise for the rest of the year,” said Jeffrey Roach, chief economist at LPL Financial.
It was good news for workers that the CPIreading was tame. Separately, the Bureau of Labor Statistics reported that average hourly earnings increased 0.3% on a monthly basis. As a result of the inflation surge that began approximately two years ago, real earnings have increased by 0.2% on an annual basis.
There is a growing discrepancy between the core and headline consumer price reports. In the past few months, the ex-food and energy index has lagged behind the all-items index.
There is a year-over-year discrepancy between the two measures due to the increase in gas prices at this time in 2022.
Prices at the pump would eventually exceed $5 per gallon, which has never occurred before in the United States. The U.S. Bureau of Labor Statistics reported on Tuesday that gasoline prices have fallen 19.7% in the past year.
Despite this, food prices remain up 6.7% from a year ago. In the early days of the economic recovery, shelter prices surged by 8% and transportation services soared by 10.2%. However, airline fares have declined by 13.4% since then