US Consumer Prices Flat in May, Strengthening September Rate Cut Expectations
U.S. consumer prices were unexpectedly unchanged in May, with lower gasoline prices and cheaper goods offsetting rising rental housing costs. Despite this stabilization, inflation remains too high for the Federal Reserve to consider cutting interest rates before September.
The Labor Department’s report on Wednesday revealed a significant easing of underlying inflation pressures last month. Notably, the cost of motor vehicle insurance declined on a monthly basis for the first time since late 2021. This data has led financial markets to increase the likelihood of the U.S. central bank cutting rates in both September and December.
While the steady consumer prices are a positive sign, the persistent high inflation indicates that the Federal Reserve is unlikely to change its monetary policy immediately. The mixed signals of stable consumer prices alongside enduring inflationary pressures present a complex economic landscape for the Fed. As investors and policymakers continue to monitor these developments, the potential for rate cuts later in the year grows more plausible, reflecting cautious optimism in financial markets.