Consumer prices in the United States reflected a moderate rise of 0.1% in May and their smallest annual increase in more than two years, but some indicators of core inflation remain high.
Compared to the same month last year, inflation eased to 4% in May, the lowest 12-month figure in more than two years and well below the 4.9% recorded in April. The decrease was due to lower increases in the prices of gasoline, supermarket products and other items.
The annual Consumer Price Index (CPI) peaked at 9.1% in June 2022, its biggest rise since November 1981, and has been tapering as last year’s big rises are receded from the calculation.
The Labor Department report was released as Federal Reserve officials prepare for a two-day policy meeting.
This month’s data has given a mixed picture of the labor market: Nonfarm payrolls rose solidly in May, but the unemployment rate rose to a seven-month high of 3.7% from a 53-year low of 3.4 % in April.
Economists believe that the continued decline in inflation and the labor market give the US central bank enough leeway not to raise rates on Wednesday after raising rates 10 times in a row since March 2022.
What is expected is that on Wednesday the Fed will announce that it will leave rates unchanged but that it will consider raising them again in July.
However, the Fed tends to focus on so-called core inflation, which excludes more volatile items like food and energy, and generally provides a clearer picture of inflation.
Overall, inflation is slowing, thanks to energy and food costs. Food commodity prices have fallen back to levels prior to Russia’s invasion of Ukraine.
However, the persistence of inflation underscores the dilemma for the central bank: the economy has defied predictions of a recession and, instead, companies have continued to hire, wages have been rising and workers have been spending.
While a brisk economy is good news for families and businesses, it can also lead to inflation.
Some economists argue that many companies are keeping prices artificially high, beyond what is necessary to break even, in order to boost their profits.
Consumers would have to stop spending massively before businesses cut their prices. Meanwhile, the strength of the labor market is encouraging citizens to continue spending.
[Con información de AP y Reuters]
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