The U.S. Bureau of Labor Statistics announced today the data on the U.S. inflation rate for May, and the results were surprising to the markets, showing a slowdown in the growth of U.S. inflation at a pace that exceeded expectations for the fourth consecutive month, opening the door for the Federal Reserve to reconsider its interest rate policy.
According to the Consumer Price Index, the annual U.S. inflation rate rose by 2.4% in May, compared to 2.3% in April, while estimates had pointed to a reading of 2.5%. This confirms the continued relative slowdown in the overall inflation rate, despite price pressures being experienced in some sectors.
On a monthly basis, the index recorded growth of only 0.1%, against expectations of growth of 0.2%, which is lower than the April reading of 0.2%. This monthly performance highlights an unexpected calm in the pace of price changes, reflecting a limited retreat in inflationary pressures on consumers across the United States.
Regarding the core U.S. inflation, which excludes energy and food prices to provide a clearer picture of price trends, the index recorded an annual increase of 2.8% in May, the same as the rate recorded in April, while expectations indicated 2.9%. On a monthly level, the index rose by only 0.1%, compared to forecasts that pointed to 0.3%, after the index recorded a monthly growth of about 0.2% in April.
These figures carry significant importance ahead of the Federal Reserve's meeting, as they may enhance the chances of maintaining interest rates in the short term, especially if the central bank adheres to its goal of gradually reducing U.S. inflation to the target level of 2%. Additionally, the weak reading of core monthly inflation may provide the Fed with additional leeway for maneuvering without the need for further tightening.
These data come at a time when anticipation for the Fed's upcoming decision is increasing, as markets reflect a state of heightened caution. The U.S. inflation figures are expected to have a direct impact on investor expectations and trading strategies in the forthcoming period.
