On June 11, 2024, a customer shopped at a Safeway store in San Francisco, California.
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A key economic indicator from the Federal Reserve showed on Friday that inflation slowed in May to its lowest annual rate in more than three years.
According to statistics, the core personal consumption expenditures price index rose only 0.1% after seasonally adjustment in April, up 2.6% from the same period last year and down 0.2 percentage points from April. Ministry of Commerce Report.
Both figures were in line with Dow Jones estimates. The annual rate in May hit its lowest level since March 2021, marking the first time in this economic cycle that inflation has exceeded the Federal Reserve’s 2% target.
Overall inflation, which includes food and energy, was unchanged from the month but rose 2.6% annually. These readings are also as expected.
In addition to the inflation data, the Bureau of Economic Analysis reported that personal income grew by 0.5% this month, stronger than expectations of 0.4%. However, consumer spending grew 0.2%, missing expectations of 0.3%.
Prices were subdued as commodity prices fell 0.4% for the month, with energy prices falling 2.1%, offsetting a 0.2% rise in services prices and a 0.1% rise in food prices.
However, home prices continue to rise, rising 0.4% this month from the previous quarter for the fourth consecutive quarter. Housing-related costs are proving more troublesome than Fed officials expected and are helping to prevent the Fed from cutting interest rates as expected this year.
Stock futures edged higher after the report was released, while U.S. Treasury yields turned negative on the day.
Investors have been trying to thwart the Fed’s interest rate intentions this year and have been forced to lower their expectations. Traders had expected at least six rate cuts this year at the start of 2024, but starting in September they now expect just two.
“There were no surprises in today’s PCE data, which is a relief and will be welcomed by the Fed,” said Seema Shah, chief global strategist at Principal Asset Management. “However, the policy path is uncertain. “A further deceleration in inflation, ideally coupled with more evidence of labor market weakness, would pave the way for a first rate cut in September.”
The Federal Reserve has an inflation target of 2% and will begin raising interest rates in March 2022. For the past year, the Federal Reserve has been viewing price increases as a temporary impact of the COVID-19 epidemic that may gradually disappear. The central bank last raised interest rates in July 2023, when it raised benchmark overnight borrowing levels to a range of 5.25%-5.5%, the highest level in about 23 years.
Recent economic data paints a picture of an economy that has withstood the Federal Reserve’s aggressive monetary tightening. According to data from the Federal Reserve Bank of Atlanta, gross domestic product grew at an annual rate of 1.4% in the first quarter and is expected to grow at an annual rate of 2.7% in the second quarter.
There have been some minor fluctuations in the labor market recently, with the number of people continuing to apply for unemployment benefits hitting the highest level since November 2021.
This is breaking news. Please check for updates.
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