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US consumer inflation slows in May on cheap energy, used cars
WASHINGTON, June 13, 2019 (BSS/AFP) – Falling prices for energy and used
cars held down US inflation in May, extending the long run of soft price
pressures, according to government data released Wednesday.
The latest confirmation of the absence of inflation should comfort markets
hoping the Federal Reserve will cut interest rates in the coming months to
boost the economy, especially amid President Donald Trump’s multi-front trade
wars.
The central bank is due to hold its next policy meeting next week but most
investors do not expect the Fed to announce any changes so soon.
The Consumer Price Index — which tracks costs for household goods and
services — rose a token 0.1 percent compared to April, matching analyst
forecasts, the Labor Department reported.
Food prices jumped 0.3 percent in the month, but that was more than offset
by a steep 0.6 percent decline in energy costs.
Compared to May of last year, prices are up 1.8 percent, slowing from the
two percent increase in April.
When the volatile food and fuel categories are excluded, “core” inflation
also rose 0.1 percent for the fourth month in a row, falling just shy of a
consensus forecast.
Compared to May of last year, the core CPI is two percent higher, slowing
slightly from the 2.1 percent pace of a month earlier.
Prices medical care, air fares, education, furniture and new autos all
rose. But costs for auto insurance, used motor vehicles and recreation fell.
Housing costs have been rising steadily as rents have increased 3.7
percent in the latest 12 months, while the rent equivalent for homeowners in
up 3.3 percent, according to the data.
Economists said the price data undermine Fed’s view that factors keeping
inflation below the two percent goal are temporary.
“The view that the dip in core inflation is transitory — a view that both
we and Fed Chairman Powell have held to — is coming under pressure,” RDQ
Economics said in a research note.
But Kathy Bostjancic of Oxford Economics said the Fed will hold off before
cutting the benchmark lending rate, and watch to see the impact of tariffs on
the economy.
“We believe the Fed will cut rates this year but wait until December as
they want to see evidence in the hard data that heightened trade tensions are
significantly eroding economic activity before pulling the easing trigger,”
she said in an analysis.
BSS/AFP/HR/0925