The inflation in USA It declined last month in a hopeful sign that the price rally that occurred earlier this year may have passed. The trend, if it continues, could bring the Federal Reserve to cut its benchmark interest rate from its 23-year high. Consumer prices, excluding volatile food and energy costs (the closely watched “core” index), rose 0.2% from April to May, the government said Wednesday. That was down from 0.3% the previous month and was the smallest increase since October. Compared to a year ago, core prices rose 3.4%, down from last month’s 3.6% rise.
Federal Reserve officials They are examining the data inflation each month to evaluate its progress in its fight against rising prices. Even as headline inflation moderates, Necessities like food, rent and healthcare are much more expensive than three years agoa continuing source of public discontent and a political threat to the president’s re-election bid Joe Biden. Most other measures suggest the economy is healthy: Unemployment remains low, hiring is strong and consumers are traveling, eating out and spending on entertainment.
Stocks on Wall Street rose sharply early Wednesday after the government reported that inflation pressures eased in May, data that investors hope could bring the Federal Reserve closer to cutting its benchmark interest rate from a 23-year high. .
Futures for major US indices, which were each up a modest 0.1% before the report was released, soared after the report was made public. Dow Jones Industrial Average and S&P 500 futures each rose 0.7% less than an hour before markets opened.
Treasury yields fell, with the 2-year yield falling to 4.71% from 4.83% late Tuesday and the 10-year yield falling to 4.30% from 4.40%. yesterday.
The Federal Reserve has kept its key rate unchanged for almost a year after raising it rapidly in 2022 and 2023 to combat the worst episode of inflation in four decades. Those higher rates have led, in turn, to more expensive mortgages, auto loans, credit cards and other forms of consumer and business debt. Although inflation is now well below its peak of 9.1% in mid-2022, it remains above the government’s target level. Federal Reserve.
Persistently high inflation has posed a perplexing challenge for the Federal Reserve, which raises interest rates – or keeps them high – to try to slow borrowing and spending, cool the economy and ease the pace of price increases.
The longer the Federal Reserve keep borrowing costs high, the greater the risk of weakening the economy too much and causing a recession. However, if you cut rates too soon, you risk reigniting inflation. Most policymakers have said they believe their rate policies are slowing growth and should curb inflation over time.
The inflation had fallen steadily in the second half of last year, raising hopes that the Federal Reserve could achieve a “soft landing,” whereby it would defeat inflation through higher interest rates without causing a recession. A result like this is difficult and rare.
But the inflation reached unexpectedly high levels in the first three months of this year, delaying the expected rate cuts of the Fed and possibly jeopardizing a soft landing.
In early May, the president Jerome Powell said the central bank needed more confidence that inflation was returning to its target before reducing its reference rate. Several officials of the Federal Reserve They have said in recent weeks that they needed to see several consecutive months of lower inflation.
Some signs suggest that the inflation will continue to cool in the coming months. Americans, especially low-income households, are reducing their spending. In response, several major retail and restaurant chains, including Walmart, targetWalgreen’s, McDonald’s and Burger King, have responded by announcing price cuts or offers.
(With information from AP)
