Federal Reserve’s preferred inflation gauge shows price pressures easing further

Jun 28, 2024, 7:00 PM

FILE - Cooper models are tended to in the service bay of a Mini dealership Nov. 3, 2022, in Highlan...

FILE - Cooper models are tended to in the service bay of a Mini dealership Nov. 3, 2022, in Highlands Ranch, Colo. On Friday, June 27, 2024, the government reports on the inflation gauge that the Federal Reserve follows most closely, a data set that will influence the Fed's decision on when to begin cutting interest rates in the coming months. (AP Photo/David Zalubowski, File)

(AP Photo/David Zalubowski, File)

WASHINGTON (AP) — A measure of prices that is closely tracked by the Federal Reserve suggests that inflation pressures in the U.S. economy are continuing to ease.

Friday’s Commerce Department report showed that consumer prices were flat from April to May, the mildest such performance in more than four years. Measured from a year earlier, prices rose 2.6% last month, slightly less than in April.

Excluding volatile food and energy prices, so-called core inflation rose 0.1% from April to May, the smallest increase since the spring of 2020, when the pandemic erupted and shut down the economy. And compared with a year earlier, core prices were up 2.6% in May, the lowest increase in more than three years.

Prices for physical goods actually fell 0.4% from April to May. Gasoline prices, for example, dropped 3.4%, furniture prices 1% and the prices of recreational goods and vehicles 1.6%. On the other hand, prices for services, which include items like restaurant meals and airline fares, ticked up 0.2%.

The latest figures will likely be welcomed by the Fed’s policymakers, who have said they need to feel confident that inflation is slowing sustainably toward their 2% target before they’d start cutting interest rates. Rate cuts by the Fed, which most economists think could start in September, would lead eventually to lower borrowing rates for consumers and businesses.

“If the trend we saw this month continues consistently for another two months, the Fed may finally have the confidence necessary for a rate cut in September,” Olu Sonola, head of U.S. economic research at Fitch Ratings, wrote in a research note.

The Fed raised its benchmark rate 11 times in 2022 and 2023 in its drive to curb the worst streak of inflation in four decades. Inflation did cool substantially from its peak in 2022. Still, average prices remain far above where they were before the pandemic, a source of frustration for many Americans and a potential threat to President Joe Biden’s re-election bid.

During Thursday night’s presidential debate, Donald Trump attacked Biden’s record on inflation. The presumptive Republican nominee asserted that Biden inherited low rates of inflation when he entered office in January 2021 but that prices “blew up under his leadership.”

While inflation was in fact ultra-low at the start of the Biden presidency, that was largely because the nation was still recovering from the brutal Covid recession, which flattened the economy. Once the economy began surging back to life with unexpected speed, causing severe shortages of goods and labor, inflation soared.

Friday’s price figures added to signs that inflation pressures are continuing to ease, though more slowly than they did last year.

The Fed tends to favor the inflation gauge that the government issued Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricey national brands to cheaper store brands.

Like the PCE index, the latest consumer price index showed that inflation eased in May for a second straight month. It reinforced hopes that the acceleration of prices that occurred early this year has passed.

The much higher borrowing costs that followed the Fed’s rate hikes, which sent its key rate to a 23-year high, were widely expected to tip the nation into recession. Instead, the economy has kept growing, and employers have kept hiring.

Lately, though, the economy’s momentum has appeared to flag, with higher rates seeming to weaken the ability of some consumers to keep spending freely. On Thursday, the government reported that the economy expanded at a 1.4% annual pace from January through March, the slowest quarterly growth since 2022. Consumer spending, the main engine of the economy, grew at a tepid 1.5% annual rate.

Friday’s report also showed that consumer spending and incomes both picked up in May, encouraging signs for the economy. Adjusted for inflation, spending by consumers — the principal driver of the U.S. economy — rose 0.3% last month after having dropped 0.1% in April.

After-tax income, also adjusted for inflation, rose 0.5%. That was the biggest gain since September 2020.

United States News

FILE - An eBay app is shown on a mobile phone, July 11, 2019, in Miami. (AP Photo/Wilfredo Lee, Fil...

Associated Press

Member of eBay security team sentenced in harassment scheme involving bloody Halloween pig mask

BOSTON (AP) — The former senior manager of special operations for eBay Inc.’s. global security team was sentenced Thursday in federal court in Boston for his role in a cyberstalking campaign that included sending a preserved fetal pig, a bloody pig Halloween mask and a book on surviving the loss of a spouse to a […]

33 minutes ago

Associated Press

Some convictions overturned in terrorism case against Muslim scholar from Virginia

ALEXANDRIA, Va. (AP) — A judge has overturned a conviction carrying a life sentence for an Islamic scholar from Virginia who was found guilty of soliciting treason after the Sept. 11 attacks for encouraging followers to fight against the U.S. in Afghanistan. The ruling issued Thursday from U.S. District Judge Leonie Brinkema overturns three of […]

44 minutes ago

FILE - This undated booking photo provided by the Missouri Department of Corrections shows Sandra H...

Associated Press

Three courts agree that a woman deemed wrongfully convicted should be freed. She still isn’t.

A circuit judge, an appellate court and the Missouri Supreme Court agree that a woman whose murder conviction was overturned should be free after 43 years in prison. Yet Sandra Hemme is still behind bars, leaving her lawyers and legal experts puzzled. “I’ve never seen it,” said Michael Wolff, a former Missouri Supreme Court judge […]

51 minutes ago

FILE - Shown is the Pennsylvania Capitol building, Dec. 8, 2015, at the state Capitol in Harrisburg...

Associated Press

Political divisions stall proposed gun policies in Pennsylvania, where assassin took aim at Trump

Months before an armed man took aim at Donald Trump at a presidential campaign rally in rural Pennsylvania, some state lawmakers had proposed to outlaw the type of rifle used in the assassination attempt. The legislation stalled without coming to a vote, but that was no surprise. Politically divided Pennsylvania has been at a standstill […]

1 hour ago

FILE - South Dakota Republican Rep. Jon Hansen, co-chair of the Life Defense Fund and a lawyer for ...

Associated Press

South Dakota anti-abortion group appeals ruling that dismissed its lawsuit over ballot initiative

PIERRE, S.D. (AP) — An anti-abortion group in South Dakota is appealing to the state’s Supreme Court after a judge dismissed its lawsuit to take an abortion rights initiative off the November ballot. In a statement, Life Defense Fund Co-Chair Leslee Unruh said the group has asked for an expedited order from the court “because […]

3 hours ago

Eli Trujillo poses inside his barbershop in Cheyenne, Wyo., Thursday, July 18, 2024. Trujillo, 87, ...

Associated Press

Too old to work? Some Americans on the job late in life bristle at calls for Biden to step aside

NEW YORK (AP) — A swath of Americans watching President Biden is seeing something beyond debate-stage stumbles and prime-time miscues: Themselves. Debate about the 81-year-old Democrat’s fitness for another term is especially resonating with other older Americans who, like him, want to stay on the job. “People were telling me I should retire too,” says […]

3 hours ago

Sponsored Articles


Midwestern University

Midwestern University Clinic visits boost student training & community health

Going to a Midwestern University Clinic can help make you feel good in more ways than one.


Collins Comfort Masters

Here’s how to be worry-free when your A/C goes out in the middle of summer

PHOENIX -- As Arizona approaches another hot summer, Phoenix residents are likely to spend more time indoors.


Condor Airlines

Condor Airlines can get you smoothly from Phoenix to Frankfurt on new A330-900neo airplane

Adventure Awaits! And there's no better way to experience the vacation of your dreams than traveling with Condor Airlines.

Federal Reserve’s preferred inflation gauge shows price pressures easing further