Inflation eased in May, which could increase the probability of at least one interest-rate cut by the Federal Reserve later this year.
In a statement, the U.S. Dept. of Labor said prices rose 3.3% in the 12 months ending in May, and that prices were flat month over month for the first time in two years.
The index for shelter rose in May, up 0.4% for the fourth consecutive month while the index for food increased 0.1%. The energy index fell 2% for the month, led by a 3.6% decrease in the gasoline index.
Reporting by The Wall Street Journal said the inflation slowdown could keep alive the idea that the Fed might cut interest rates at its September meeting. The report said officials are “looking to regain confidence that price growth is slowing after several disappointing figures at the beginning of the year.”
According to reporting by The New York Times, Federal Reserve officials left interest rates unchanged in their June decision and predicted they will cut borrowing costs once before the end of the year.
Interest rates stand at 5.25% to 5.5%.
The S&P 500 ended 0.8% higher yesterday, and stock futures climbed after the report, while Treasury yields fell. Futures markets indicated an approximate 70% chance of two potential rate cuts by year’s end, according to the WSJ.
Data in early to mid-June suggest that the U.S. economy has resumed a gradual slowdown without damage to the labor market. The U.S. unemployment rate has been 4% or lower for 30 straight months, and wage gains continue.
