Inflation cooled slightly in the US last month, as consumers’ frustration over high prices continues to loom over November’s presidential election.
The consumer price index rose at annual pace of 3.3% in May, slipping back from the previous month’s reading of 3.4%.
Price growth has fallen dramatically since surging above 9% two years ago, to its highest level in a generation, during the economic fallout of the Covid-19 pandemic.
But with many Americans still feeling the pinch, the consumer price index has yet to fall as far as policymakers want.
While fuel prices and airline fares fell in May, and grocery price inflation was flat, rising shelter costs, including rent, helped prop up the headline rate of inflation on the year.
On a month-to-month basis, however, prices were unchanged overall – bolstering hopes that inflation is heading back towards normal levels.
The so-called “core” consumer price index, which strips out volatile food and energy prices, also rose at a weaker-than-expected monthly rate of 0.2%.
The latest official data was released hours before the Federal Reserve, which raised interest rates sharply in 2022 and 2023 in a bid to cool the US economy, will announce its latest decision.
The central bank is widely expected to keep rates between 5.25% and 5.5%, a two-decade high. It will also publish a closely scrutinized summary of top officials’ expectations for growth, jobs and inflation.
Anxiety over the state of the economy continues to linger. Nearly three in five Americans wrongly believe the US is in recession, according to a Harris poll conducted exclusively for the Guardian last month.
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Unemployment is nearing 50-year lows, and Wall Street has risen sharply since the fall. But as Joe Biden seeks re-election to the White House, surveys indicate he is struggling to reassure voters that the economy has strengthened on his watch.
Wall Street opened higher on Wednesday morning as the latest inflation data raised hopes that the Fed could cut rates several times before the end of the year.
“We still need several more months of this, but the fundamentals are encouraging,” said Paul Ashworth, chief North America economist at Capital Economics, who suggested a rate cut as soon as September was “still in play”.
