The consumer price index, a broad-based measure of goods and services across the sprawling U.S. economy, increased 0.1% for the month, putting the annual inflation rate at 2.4%.
Federal Reserve officials consider core a better measure of long-term trends, with several expressing concerns recently over the impact that tariffs would have on inflation.
Energy slipped 1% on the month, while new and used vehicle prices posted respective declines of 0.3% and 0.5%.
Though shelter prices rose on the month, the 3.9% annual increase is the lowest rate since late 2021.
With the modest inflation moves, real average hourly earnings increased 0.3% for the month and were up 1.4% from a year ago.
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President Donald Trump’s tariffs have not yet had a major effect on inflation, so consumer prices increased less than anticipated in May, according to a Bureau of Labor Statistics report released Wednesday.
A comprehensive indicator of goods and services throughout the vast United States is the consumer price index. S. . economy, grew by 0.1 percent for the month, resulting in a 2.4 percent annual inflation rate. Dow Jones polled economists, who had been hoping for readings of 0.2 and 2.4 percent, respectively.
In contrast to projections of 0point 3 percent and 2point 9 percent, the core CPI fell by 0point 1 percent and 2point 8 percent, respectively, when food and energy were excluded. Concerns about the effect of tariffs on inflation have recently been voiced by a number of Federal Reserve officials, who believe that core is a more accurate indicator of long-term trends.
The annual rate for all items increased by 0 percentage points compared to April, but the core rate remained unchanged.
Some of the price increases were partially offset by the ongoing weakness in energy prices, and a few other important items that were anticipated to see tariff-related increases—car and clothing prices in particular—actually saw decreases.
While the price of new and used cars decreased by 0.3 and 0.5 percent, respectively, energy fell 1 percent for the month. In the energy sector, gasoline saw a 2 percent decline, bringing the year-over-year decline to 12 percent.
The “primary factor” in the otherwise modest CPI increase, according to the BLS, was the 0.3 percent increase in food and shelter. Compared to a year ago, egg prices were up 41.5 percent, despite a 21.7 percent decline. Apparel reported a 0.4 percent decline.
The 3point 9 percent annual increase is the lowest since late 2021, despite the fact that shelter prices increased during the month.
Real average hourly earnings rose 0.3 percent for the month and 1 0.4 percent from a year ago as a result of the modest inflation moves.
“Today’s below-prediction inflation print is reassuring – but only to a certain extent,” Principal Asset Management chief global strategist Seema Shah stated. “Assuming that the price shock won’t occur is far too soon because tariff-driven price increases might not appear in the CPI data for a few more months. “.
Treasury yields decreased following the report, but stock market futures saw a positive turn.
In a post on X, Vice President JD Vance echoed Trump by urging the Fed to lower interest rates since inflationary pressures haven’t materialized.
“The Fed’s refusal to lower rates is monetary malpractice,” Vance wrote, “although the president has been saying this for some time, it’s even more obvious.”.
There are still trade tensions.
The Trump administration is still attempting to negotiate trade agreements, according to the BLS report. Trump imposed 10% universal duties on the United States in his “liberation day” announcement on April 2 that shook financial markets. S. imports and a variety of other alleged reciprocal tariffs on nations that, according to him, have engaged in unfair trade practices.
In an effort to diffuse a raging trade war between the two countries, White House officials have most recently met with Chinese leaders. Both nations’ leaders have stated that they are close to reaching an agreement on rare earth resources, such as those required for car batteries, as well as technology-related goods.
A week after the first move, Trump announced that other countries hit with reciprocal duties have until early July to reach an agreement.
White House officials maintain that tariffs won’t lead to uncontrollable inflation because they anticipate that foreign manufacturers will bear the majority of the expenses. However, many economists think that because the duties are broad-based, they may raise prices more sharply, with the effects being most noticeable through the summer as inventories built up before the tariff was implemented begin to decline.
According to Goldman Sachs Asset Management’s global CIO of multi-asset solutions, Alexandra Wilson-Elizondo, “the tariffs aren’t having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand,” as indicated by the benign May inflation readings. “Service prices should stay the same, indicating that any increase in inflation is probably only going to be short-term, even though we might see some price increases on goods later. “,”.
As policymakers assess the effect of tariffs on inflation, market pricing suggests the Fed is unlikely to consider additional interest rate cuts until at least September. In light of declining inflation data and indications of a labor market slowdown, Trump has been pressuring the Fed to reduce interest rates.
Changes in data collection.
Other Trump initiatives have complicated the evaluation of the inflation figures.
The BLS has limited its data collection and expanded a process known as imputation, which uses models to fill in incomplete data, while the administration has implemented a hiring freeze in an attempt to reduce the size of the federal workforce. The BLS, for example, stated last week that as of April, it has been “reducing sample in areas across the country” and has completely stopped collecting in Buffalo, New York; Provo, Utah; and Lincoln, Nebraska.
Expanded imputation is probably going to be used going forward because of the BLS’s continuous staffing shortage. Although it is challenging to draw any conclusions about a directional effect, analysts at BNP Paribas wrote in a note that smaller sample sizes might be more susceptible to volatility.
The BLS stated that although the actions to halt collections may affect subindices, they will have “minimal impact” on overall data collection.
JD Vance is the vice president, to be precise. His name was spelled incorrectly in an earlier version.
