US inflation cools as interest rate decision eases

U.S. consumer price inflation eased slightly last month, official data showed, with interest rates on hold at a 23-year high.

According to the US Labor Department, prices rose 3.3% in the year to the end of May, down 0.1 percentage points from the previous month.

Core inflation has eased even as rents continue to weigh on household budgets, stripping out more volatile items such as food and energy prices.

Despite borrowing costs at their highest rate in years, Federal Reserve officials held off on any interest rate cuts this month.

The inflation number was lower than some economists’ expectations, meaning they now believe there will be more rate cuts this year, but it remains above the U.S. Federal Reserve’s 2% target.

People in the US are still feeling the pinch of rising rents and electricity bills, while food inflation is hovering around 2%.

The US inflation rate is different for other goods and services.

The pace of price increases for transportation such as taxi rides rose by more than a tenth in the year to May, while used car inflation slowed to almost a tenth.

Lindsey James, investment strategist at Quilter Investors, said despite the decline in inflation markets, “it’s staying put.”

“[We are] Inflation may fall quickly towards the 2% target or the economy is waiting to be buckled under the crisis and a new stimulus is needed.”

The rate of inflation is the rate at which prices rise or fall over a period of time.

In the United States, the Bureau of Labor Statistics uses the Consumer Price Index to measure inflation.

It gets its information from 23,000 businesses and includes price verification of about 80,000 consumer products.

Although the pace of average price increases has been steady, some major U.S. retailers, including Target, have cut prices on items such as food and baby products to attract customers.

Supermarket milk prices fell by 1.3%, while prices of other non-alcoholic beverages also fell.

There is no change in the prices of fruits and vegetables.

Rents rose 0.4%, matching April’s rise, and health care costs rose 0.5%.

Prescription drug prices rose 2.1% and hospital services rose 0.5%.

With the presidential election on November 5th, how the US economy is faring will be crucial.

Inflation figures are said to affect US President Joe Biden’s popularity as Americans continue to feel the pinch.

The US Federal Reserve kept its target rate on Wednesday at 5.25% to 5.5%.

It had forecast a rate cut this year – but policymakers were divided.

Four expected no cut, seven predicted one cut, and eight thought there would be two.

Following the inflation data, traders added bets for a rate cut in September and increased bets for a second cut in December.