Friday, July 19, 2024
HomeWorldFederal Reserve’s preferred inflation gauge shows price pressures easing further

Federal Reserve’s preferred inflation gauge shows price pressures easing further

WASHINGTON — A gauge of prices closely watched by the Federal Reserve suggests inflationary pressures in the U.S. economy continue to ease.

Friday’s Commerce Department report showed consumer prices were flat from April to May, the mildest performance in more than four years. Compared to a year earlier, prices rose by 2.6% last month, slightly less than in April.

Excluding volatile food and energy prices, so-called core inflation rose 0.1% from April to May and 2.6% from 12 months earlier. Both figures were slight improvements from the previous month’s data.

The latest figures are likely to be welcomed by Fed policymakers, who have said they need to be confident that inflation is slowing sustainably toward the 2% target before they start cutting rates. The Fed’s rate cuts, which most economists expect could begin in September, would ultimately lead to lower interest rates for consumers and businesses.

The Fed raised its benchmark rate eleven times in 2022 and 2023 as it seeks to rein in the worst inflation in four decades. Inflation has fallen significantly from its 2022 peak. Still, average prices remain well above pre-pandemic levels, a source of frustration for many Americans and a potential threat to President Joe Biden’s re-election bid. But Friday’s data adds to signs that inflationary pressures are continuing to ease, albeit more slowly than last year.

The Fed is leaning toward favoring the inflation gauge the government released Friday — the personal consumer expenditure price index — over the better-known consumer price index. The PCE index attempts to account for changes in the way people shop when inflation rises. For example, it can record when consumers switch from expensive national brands to cheaper private labels.

READ ALSO  Lara Worthington shows off her incredible figure in a rare vintage Jean Paul Gaultier corset dress during stunning photoshoot in Marrakech

Just like the PCE index, the latest consumer price index showed inflation fell for the second straight month in May, bolstering hopes that the acceleration in prices seen earlier this year is over.

It was widely expected that the much higher borrowing costs that followed the Fed’s rate hikes, which pushed the policy rate to a 23-year high, would push the country into recession. Instead, the economy has continued to growAnd employers have continued to hire staff.

Recently, however, the economy’s momentum appears to be waning, with higher rates appearing to weaken the ability of some consumers to continue spending freely. On Thursday, the government reported that the economy grew by 1.4% annually from January through March, the slowest quarterly growth since 2022. Consumer spending, the main driver of the economy, grew at a tepid 1.5% annual rate.

WATCH VIDEO

DOWNLOAD VIDEO

YOU MAY ALSO LIKE
- Advertisment -

RECENT POSTS

- Advertisment -
- Advertisment -