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Prices Surprisingly Remain Unchanged in May in Good Sign For Inflation Fight

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Key Takeways

  • Prices as measured by the Bureau of Labor Statistics’ Consumer Price Index (CPI) were virtually unchanged in May.
  • That was a surprise to economists, who expected a 0.1% increase month-over-month.
  • This could be a good sign for the Federal Reserve, whose fight against inflation has led them to raise and hold interest rates to their highest level in more than two decades.

Inflation moved down in May, faster than many forecasters predicted.

The Consumer Price Index showed Wednesday that prices were virtually unchanged in May, down from a 0.3% increase in April, according to the Bureau of Labor Statistics. Prices rose 3.3% over the year, slightly lower than the year-over-year rate in April. Both numbers were better than the consensus expectation from economists surveyed by the Dow Jones Newswires and the Wall Street Journal.

This report could help ease fears that inflation is flaring up again after price increases were surprisingly elevated in the first quarter. Instead, prices have continued their descent, falling significantly from the 41-year peak hit in June 2022, when the CPI was up 9.1% over the previous 12 months. 

Federal Reserve’s officials meet later today and have repeatedly said they’re looking for economic data—especially inflation reports—to show that consumer prices are firmly on the path down to an annual 2% inflation rate before they’ll decide to cut interest rates. The central bank has maintained its key fed funds rate at a 23-year high since last July, pushing up borrowing costs for mortgages and other loans, in hopes of slowing the economy and stifling inflation.

Before the report, traders were pricing in July 8.9% chance of a rate cut in July and 54.4% in September, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. About 15 minutes after the data was released, those numbers jumped to 14.5% and 70.3% respectively.

Check back later for more information and analysis on today’s CPI report.

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