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US consumer prices barely rise in May
[WASHINGTON] US consumer prices barely rose in May as a rebound in the cost of food was offset by cheaper gasoline, pointing to moderate inflation that could increase pressure on the Federal Reserve to cut interest rates this year.
The Labor Department said on Wednesday its consumer price index (CPI) edged up 0.1 per cent last month. The CPI gained 0.3 per cent in April. In the 12 months through May, the CPI increased 1.8 per cent, slowing from April's 1.9 per cent gain. Economists polled by Reuters had forecast the CPI would rise 0.1 per cent in May and 1.9 per cent year-on-year.
Excluding the volatile food and energy components, the CPI nudged up 0.1 per cent for the fourth straight month. The so-called core CPI was held down by a sharp decline in the prices of used motor vehicles and trucks as well as medical care products. In the 12 months through May, the so-called core CPI rose two per cent after advancing 2.1 per cent in April.
A report on Tuesday showing core producer prices advancing solidly for a second consecutive month in May had offered hope for a firmer core CPI reading in May, as well as in the inflation measure tracked by the Fed for monetary policy.
Policymakers from the US central bank are scheduled to meet on June 18-19 against the backdrop of rising trade tensions, slowing growth and a sharp step-down in hiring in May that has led financial markets to price in at least two interest rate cuts by the end of 2019.
Fed Chairman Jerome Powell said last week that the central bank was closely monitoring the implications of the trade war on the economy and would "act as appropriate to sustain the expansion." A rate cut is not expected next Wednesday.
The Fed's preferred inflation measure, the core personal consumption expenditures (PCE) price index, increased 1.6 per cent in the year to April after gaining 1.5 per cent in March. Data for May will be released later this month. The core PCE price index has been running below the Fed's two per cent target this year.
Gasoline prices fell 0.5 per cent in May after rising 5.7 per cent in April. Food prices rebounded 0.3 per cent in May after dipping 0.1 per cent in the prior month. Food consumed at home increased 0.3 per cent.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3 per cent in May after rising 0.3 per cent in April.
Healthcare costs increased 0.3 per cent, matching April's rise. But the prices for prescription medication fell 0.2 per cent. Apparel prices were unchanged in May after tumbling 0.8 per cent in the prior month. They had declined for two months in a row after the government introduced a new method and data to calculate apparel prices.
Prices for used motor vehicles and trucks tumbled 1.4 per cent, marking the fourth straight monthly drop. The cost of motor vehicle insurance fell 0.4 per cent, the most since May 2007. There were also decreases in the cost of recreation.
But prices for airline tickets, household furnishings and new vehicles rose last month.