At the same time, consumers barely increased their spending last month, pushing it up just 0.1%, after a solid rise in April of 0.6%.
The inflation index showed prices rose 3.8% in May from their level 12 months earlier, down from a 4.4% year-on-year increase in April. And from April to May, prices rose just 0.1%.
Even so, last month’s progress in reducing the headline rate of inflation was tempered by an elevated reading for “core” prices, a category that excludes volatile food and energy costs. That underscored the Fed’s belief that it will need to keep raising interest rates to bring down the high inflation rate.
Core prices rose 4.6% in May from a year earlier, slightly below the 4.7% annual increase in April. It was the fifth straight month that the core figure was 4.6% or 4.7%, a sign that the Fed’s streak of 10 rate hikes in the past 15 months has not controlled all price categories. From April to May, core prices rose 0.3%, a pace that, if sustained, will keep inflation well above the Fed’s 2% target.
The government report released Friday comes two days after Fed Chairman Jerome Powell said the US central bank was prepared to keep interest rates at their peak for an extended period in order to control prices. rising, that have shrunk Americans’ paychecks—adjusted for inflation—and that have hit businesses. Fed policymakers as a group anticipate two more rate hikes this year.
