U.S. inflation slows as anticipated in May

Inflation in the U.S. decelerated as expected in May on an annual basis, according to the Federal Reserve’s preferred measure of price gains. This slowdown could prompt the Fed to consider interest rate cuts in 2024.

The headline personal consumption expenditures (PCE) price index cooled to 2.6% from 2.7% year-on-year. Every month, it remained flat at 0.0% after rising 0.3% in April, marking the first time in six months that it did not increase.

The core PCE, which excludes volatile items like food and fuel, also eased to 0.1% month-on-month and 2.6% year-on-year.

Both overall and core readings aligned with economists’ expectations.

Earlier this month, the Fed held rates steady at a two-decade high range of 5.25% to 5.5% and indicated they expect only one rate cut in 2024, down from a previous estimate of three. Many policymakers called for more evidence of inflation sustainably easing toward their 2% target.

San Francisco Fed President Mary Daly stated on CNBC that while inflationary pressures are gradually abating, the central bank’s efforts to control prices are “not done yet.”