US inflation still going strong as prices rise for third straight month

Jake Cordell
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The USA is one of the few developed economies where inflation is looking perky
The USA is one of the few developed economies where inflation is looking perky (Source: Getty)

Higher petrol prices and a weaker dollar helped US inflation stay hovering around the one per cent mark in May, official statistics out this afternoon confirmed.

Prices rose by 0.2 per cent over the month in the world's largest economy, but the annual rate of inflation slipped back from 1.1 per cent to one per cent.

However, following sharp volatility at the start of the year, the figures marked the third consecutive month where prices have gone up over the period and will go someway to counter the dovish interpretation of yesterday's Federal Reserve statement.

Core inflation, which came in at 2.2 per cent, has now been at or above the crucial two per cent mark for the past seven months, in a sign that inflation could return rapidly to the economy once the effects of a falling oil price fall out of the market.

Read more: Is the end of Eurozone deflation in sight?

Brexit fears, a poor jobs report and weaker growth forecasts put the Federal Reserve on pause in this week's meeting, but analysts said that the US economy should still be primed for an interest rate rise this side of the presidential election.

Paul Ashworth at Capital Economics said there was "evidence of a clear acceleration in core services inflation, which will soon be compounded by a fading of the drag on goods prices from the stronger dollar."