Skip to Main Content

06/12/2024 |

Inflation Slows in May: Key Takeaways from the Latest CPI Report

This is the header image for the CPI blog post.

May CPI Report Highlights

The consumer price index (CPI) held flat in May, increasing by 3.3% from a year ago, which was slightly below market expectations. Excluding volatile food and energy prices, the core CPI rose 0.2% for the month and 3.4% annually, again falling short of market estimates. Price increases were controlled by a 2% drop in the energy index and a modest 0.1% increase in food prices. These numbers, reported by the Bureau of Labor Statistics, indicate a slight loosening of inflation’s grip on the U.S. economy.

Market Reactions and Influences

Following the CPI report, stock market futures rose, and Treasury yields slid. The Dow Jones Industrial Average climbed about 250 points in morning trading, while the 10-year Treasury yield fell to 4.27%. Despite lower overall inflation figures, shelter inflation increased by 0.4% for the month and 5.4% from a year ago, continuing to be a significant factor in the Federal Reserve’s inflation battle. Energy and food prices played key roles in keeping overall price increases in check, with gas prices dropping 3.6%.

Federal Reserve and Future Projections

The release of the CPI data comes as the Federal Reserve concludes its two-day policy meeting, with markets expecting the Fed to maintain its benchmark overnight borrowing rate. Following the report, the likelihood of a Fed rate cut in September increased to 73%, up from 53% the previous day. However, Fed officials have emphasized the need for sustained positive inflation data before making any policy changes. Projections for GDP growth, inflation, and unemployment will be updated based on the latest CPI figures, influencing the Fed’s future decisions.