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US inflation softens in May while incomes rise

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A closely watched measure of US inflation edged downward last month as prices for durable goods and energy weakened, government data showed Friday.

[WASHINGTON] A closely watched measure of US inflation edged downward last month as prices for durable goods and energy weakened, government data showed Friday.

Meanwhile, Americans in May got a healthy bump in income, which should support consumer spending in the months ahead.

The result showed any breakout in inflation was still nowhere in sight for the world's largest economy and should comfort investors hoping the Federal Reserve will cut interest rates next month.

The Personal Consumption Expenditures Price Index - a gauge of costs for goods and services which is the Fed's preferred measure of inflation - slowed by a tenth of a point to 0.2 per cent from April, matching forecasts.

Compared to May of last year, the index was also a tenth lower at 1.5 per cent, well below the Fed's two percent target, which it has not exceeded since August of 2018.

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Outside the volatile food and fuel categories, the index also came in at 0.2 per cent, the same as April. Year-on-year, it was also steady at 1.6 per cent.

When adjusted for inflation, however, disposable incomes got their largest bump in five months, rising 0.3 per cent, helping makeup for a bout of weakness at the start of the year and likely supporting GDP growth in the second quarter.

Gains in spending were slower, however, rising only 0.2 per cent.

As President Donald Trump pursues aggressive trade policies that have rattled the global economy, the Fed has sent strong signals that it is prepared to cut interest rates to preserve the record economic expansion.

But policymakers have cautioned that a rate cut is not guaranteed and will depend on future economic data.

AFP

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