US Federal Reserve's preferred inflation gauge shows signs of moderation in May
Date
6/30/2024 4:16:19 AM
(MENAFN) Recent data from the Commerce Department indicates that the US Federal Reserve's preferred inflation gauge, the core personal consumption expenditures (PCE) price index, showed signs of moderation in May on both annual and monthly bases. The core PCE price index, excluding volatile food and energy prices, rose 2.6 percent year-on-year in May, down slightly from a 2.8 percent increase in April, aligning with market expectations.
On a monthly basis, the core PCE price index increased by 0.1 percent in May, a decrease from a 0.3 percent rise in April, also meeting market estimates. Meanwhile, the broader PCE price index, which includes food and energy costs, saw an annual increase of 2.6 percent in May, following a 2.7 percent rise in April. On a monthly basis, the PCE price index remained unchanged in May, after a 0.3 percent increase in April, in line with market forecasts.
These figures suggest a deceleration in inflationary pressures within the largest economy globally, potentially paving the way for the Federal Reserve to consider lowering interest rates as early as September. The Fed had aggressively raised interest rates between March 2022 and July 2023, implementing a total of 11 increases to combat record-high inflation, bringing the federal funds rate to a range of 5.25 percent to 5.5 percent—its highest level in over two decades.
However, amid easing inflation figures, the Fed opted not to increase rates four times last year and has similarly held off on further hikes in 2024. Market analysts widely anticipate the Fed's first rate cut in the latter half of this year, reflecting a possible shift in monetary policy towards supporting economic growth amidst moderating inflationary pressures.
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