US consumer price inflation slowed in May, official data revealed today, in news that could add to pressure on the country’s central bank to cut interest rates.
The consumer price index (CPI) rose 1.8 per cent in May compared to a year earlier, down from the two per cent rate seen in April, statistics from the US labour department revealed.
The news comes a day after US President Donald Trump called “very low inflation” a “beautiful thing”, but said the Federal Reserve’s interest rate was “way too high”.
Global trade tensions and signs of a slowing US economy have led the markets to price in a series of interest rate cuts this year.
Yet the labour department data showed a robust rise in inflation in both healthcare costs and rent.
The overall CPI increased 0.1 per cent in May month on month. This compared to a 0.3 per cent rise in April.
A significant drop in the price of energy offset rising food costs, the labour department said.
The dollar fell against the euro following the data release, but has since regained lost ground. It was up 0.1 per cent against the single currency to buy €0.889 by 3.15pm UK time.
Michael Pearce, senior US economist at Capital Economics, said the muted inflation figures were “not enough to prompt the Fed to cut interest rates, but we think it means they will not hesitate to act if economic growth slows further”.
He said: “We don’t think the Fed will cut interest rates imminently. But we expect that a further slowdown in economic growth, together with still muted inflation, will be enough for the Fed to pull the trigger and begin cutting rates later this year.”
The US central bank board meets on Wednesday to decide its next interest rates decision. Chairman Jay Powell said last week the Fed would “act as appropriate to sustain the expansion” of the economy in the context of global trade tensions.