June 13, 2023
The encouraging trend in consumer prices will provide the Fed some leeway to keep rates unchanged this month …
Chief economist at LPL Financial, Jeffrey Roach, in light of the May Consumer Price Index data. The Federal Reserve will meet this week to determine rate hikes.
The Big Picture: The Consumer Price Index – which reflects prices of a mixed basket of goods and services – rose 0.1% in May "after increasing 0.4 percent in April," and showed an annual growth rate of 4% which is "below the 4.2% annual increase economists had expected" (U.S. Bureau of Labor Statistics). The inflation rate is now at its lowest level since March 2021.
Why It Matters: CPI data is used as an important gauge of inflation (high inflation = your dollar buys you less). This number is also important leading up to the Federal Reserve's meeting this week, in which they will decide whether enough improvement in the economy has been made to pause rate hikes.
A Closer Look At The Numbers: While the data shows monthly price increases for food, shelter, and used vehicles, it shows a 3.6% decrease in energy prices from April to May. Core inflation is up 5.3% from a year ago (core inflation is important because "it presents a truer gauge of price increases, and the current rate is still far above the Fed's 2% target," explains CBS News; the measure for core inflation excludes food and energy prices).
Inflation rose at a 4% annual rate in May, the lowest in 2 years
by Jenna Lee,
