The bustling city of New York, USA, experienced a slight easing in consumer price rises last month, according to official data released. The latest figures come just as the Federal Reserve decided to maintain interest rates at a 23-year high.
Data from the US Labor department indicated a 3.3% increase in prices in the year leading up to May, a decrease of 0.1 percentage points from the previous month. Even with rents continuing to impact household budgets, core inflation – which excludes volatile items like food and energy – also slowed.
Despite the Federal Reserve keeping borrowing costs at their highest level in years, there were no interest rate cuts announced this month. The central bank held its target rate steady at 5.25% to 5.5% with a forecast of a single rate cut later in the year. However, there was a split among policymakers, with four expecting no cut, seven predicting one cut, and eight anticipating two cuts.
Following the inflation report, traders increased bets on a rate cut in September and a second cut in December. The lower-than-expected inflation figure has led some economists to believe that a rate cut this year is more likely, even though it remains above the central bank’s 2% target.
While the average pace of price rises remained stable, major US retailers like Target have resorted to slashing prices on some goods, such as food and baby products, to attract customers. Milk prices saw a 1.3% decrease, with other non-alcoholic drink prices also dropping. However, prices for fruits and vegetables remained unchanged.
In light of the upcoming presidential election on November 5, the performance of the US economy is becoming increasingly crucial. Inflation figures are said to be impacting President Joe Biden’s popularity as Americans grapple with rising costs across various sectors.
The rate of inflation varies for different goods and services, with transportation costs rising by more than 10% and used car inflation dropping by nearly 10% in the year leading up to May. With uncertainties surrounding the economy and inflation rates, experts suggest that the market remains in a holding pattern, waiting for signs of stabilizing inflation or potential economic stimulus measures.