- The Federal Reserve’s preferred core inflation measure slowed in May, boosting expectations for a U.S. interest rate cut later this year, according to Bloomberg.
- The so-called core personal consumption expenditures inflation index, which excludes volatile items such as food and energy, rose 0.1% on a monthly basis, marking the smallest increase in 6 months.
- On a year-over-year basis, the index rose 2.6%, the lowest level since early 2021, according to data from the Bureau of Economic Analysis released Friday. Inflation-adjusted consumer spending rose 0.3%. Nominal income rose 0.5%.
- The report is good news for Federal Reserve officials who are looking to start cutting interest rates in the coming months, after they recently scaled back their expectations for rate cuts this year following worse-than-expected inflation data for the first quarter of 2024..
- Officials are also focusing particularly on the services inflation index, which excludes housing and energy items and tends to be more persistent. That measure rose 0.1% in May from the previous month, according to data from the Bureau of Economic Analysis, the lowest rate since October.
- On the other hand, household demand has remained resilient so far, despite the negative impact of high interest rates on some sectors of the economy.
- The report showed that inflation-adjusted spending on services rose 0.1%, driven by spending on airline tickets and health care, while spending on goods rose 0.6%, led by software and cars.
