May inflation cooled to 4% – Fed likely to call off interest rate hikes

inflation, May inflation cooled to 4% – Fed likely to call off interest rate hikes

Key Takeaways:

  • Bureau of Labor Statistics reported inflation at 4%, the lowest since March 2021.
  • Fuel oil led the cool-off with -37% year-over-year.
  • The Fed is unlikely to raise interest rates in another round on June 14.

YEREVAN ( – According to the latest Consumer Price Index (CPI) report from the Bureau of Labor Statistics, US inflation in May cooled to 4% on an annual basis, the lowest reading since March 2021.

Fuel Oil leads the inflation cool-off

The report specified that the index for shelter was “one of the largest contributors” to the monthly increase, much like in April, standing at 8%. While the food index was virtually unchanged since the previous month, energy commodities contributed to the coll-off.

Fuel oil led the pack with a 37% price decline year-over-year, while gasoline and piped gas closely followed.

CPI report data is in - inflation at 4%. Source: Bureau of Labor Statistics
CPI report data is in – inflation at 4%. Source: Bureau of Labor Statistics

The index for all items less food and energy rose 0.4% in May, as it did in April and March. The shelter index increased 0.6% over the month after rising 0.4% in April. The index for rent rose 0.5% in May, as did the index for owners’ equivalent rent.

further read the report.

The report showed that while inflation is still above the Fed-set healthy 2% target, it is showing continuous signs of decelerating. Thus, there is enough data to suggest Federal Reserve Chair Powell is not likely to go through with another interest rate hike.

Is the Fed done with interest rate hikes?

In detail, inflation peaked at 9% in June 2022. Since then, the Federal Reserve implemented ten consecutive interest rate hikes to curb the CPI increase. The latest overview raised interest rates by 25 bps during the Federal Open Market Committee (FOMC) meeting on May 3, meeting market expectations.

Our focus remains squarely on maintaining the dual mandate to promote maximum employment and stable prices for the American people. My colleagues and I understand the hardship that inflation is causing, and we remain strongly committed to bringing inflation down to the 2% goal.

Powell said at the time.

Experts agree Powell is unlikely to continue the hawkish policies

Moreover, according to Mark Zandi, chief economist at Moody’s Analytics, markets expect a pause in interest rate hikes.

The most encouraging thing is the year-over-year growth rates are going to come down pretty sharply. The headline number is going to feel good. It’s going to be encouraging, showing inflation is moving in the right direction. More fundamentally, I think inflation is moving in the right direction.

said the expert.

Omair Sharif, president of Inflation Insights LLC, agreed with the outlook.

This is a pretty good print in terms of signaling that we are likely to see the core CPI soften materially starting next month. The way things are going now, I suspect we’ll see a soft core that will tamp down the odds of a July hike.

commented Sharif.

Also read: The Burisma bribery story: US President Joe Biden & his son Hunter received $10M from Ukraine gas company.

Notably, several policymakers, including Powell, have signaled they prefer to skip a rate hike at the June 13-14 meeting while still leaving the door open to future tightening if needed. However, the final decision will come on after June 14.

Leave a Comment

Related Articles

Our Partners