US Consumer Price Index slightly rises 0.1% in May

The US CPI increases at its smallest rate since January.

US flag after Consumer Price Index May statistics Source: Bloomberg

The US Consumer Price Index (CPI) marginally increased by 0.1% in May, according to the US Department of Labour. That statistic falls below economists’ expectations of a 0.2% rise.

US CPI: key figures

Food prices +0.3%
Medical care +0.3%
Gasoline prices -0.5%

Food and healthcare costs rise, gas prices fall

Food prices jumped by 0.3% in May after dropping 0.1% in April. Healthcare costs grew by 0.3%, equalling the same percentage increase in April. Gasoline prices dipped by 0.5% in May after climbing 5.7% in April because of falling oil prices.

Will US CPI figures influence the Fed to cut interest rates?

The volatility caused by recent economic issues like the US-China trade impasse led US Federal Reserve chair, Jerome Powell, to give a dovish speech about the Fed possibly taking action to help the US economy. While this latest CPI report is worse-than-expected because of muted inflation, some economists like, Eric Winograd, of AllianceBernstein are predicting that the Fed may not reduce interest rates in the future.

‘Inflation at the current run rate neither prevents nor forces action on rates. It is low enough to allow for rate cuts but not so low as to require them,’ said Winograd.

Michael Pearce, senior US economist at Capital Economics, also doesn’t think the Fed will cut interest rates soon. However, he believes that more disappointing economic statistics may drive the Fed to cut interest rates at the end of 2019.

‘We don’t think the Fed will cut interest rates imminently. But we expect that a further slowdown in economic growth, together with still muted inflation, will be enough for the Fed to pull the trigger and begin cutting rates later this year,’ said Pearce.


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