Recent economic data suggests a continued easing of inflationary pressures in the United States, as evidenced by the Commerce Department’s latest report on the personal consumption expenditures (PCE) price index, a measure closely monitored by the Federal Reserve.
From April to May, consumer prices remained flat, marking the most moderate performance in over four years.
Year-over-year, prices rose by 2.6%, a slight decrease from April’s figures.
The core inflation rate, which excludes volatile food and energy prices, saw a minimal 0.1% increase from April to May, the smallest uptick since the pandemic’s onset.
Notably, prices for physical goods decreased by 0.4%, while service prices increased marginally by 0.2%.
This data is likely to be well-received by Federal Reserve policymakers, who have emphasized the need for sustained inflation reduction towards their 2% target before considering interest rate cuts.
Some economists project that such cuts could begin as early as September if current trends persist.
The Fed’s aggressive interest rate hikes in 2022 and 2023, aimed at curbing the worst inflation streak in four decades, have significantly cooled inflation from its 2022 peak.
However, average prices remain substantially higher than pre-pandemic levels, a point of contention in the current political landscape.
Despite concerns that higher borrowing costs might trigger a recession, the economy has continued to grow, albeit at a slower pace.
The first quarter of 2024 saw an annual growth rate of 1.4%, the slowest since 2022.
Consumer spending, the primary economic driver, grew at a modest 1.5% annual rate.
Encouragingly, May’s report also indicated increases in consumer spending and incomes. Adjusted for inflation, consumer spending rose 0.3%, rebounding from April’s 0.1% decline.
After-tax income, also adjusted for inflation, increased by 0.5%, the most substantial gain since September 2020.
The Associated Press contributed to this article.