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This key inflation indicator was stable in May

Minneapolis (CNN Business)Inflation gauges following the Federal Reserve have been flat in May. Inflation hasn't diminished yet, despite the central bank's firstefforts to cool the economy.

The Commerce Department reported Thursday that the monthly consumer spending index rose 6.3% for the year ended in May. Theis consistent with the April reading, suggesting that the price increase has taken a breather since the40-year high of 6.6% in March.

The core PCE inflation index, which removes volatile food and energy costs, rose 4.7% year-on-year from 4.9% in April. The Fed focuses on inflation derived from this particular indicator and informs policy-making decisions.

Core PCE has been on a downtrend since reaching 5.3% in February, but remains at historically high levels.

May prices rose 0.6% month-on-month, above the 0.2% growth rate in April, but below the 0.9% rise in March, but the core price is 4? It increased by 0.3% for the month in a row.

Considering inflation, consumer spending fell 0.4% from April. Cailin Birch, Global Economist of the Economist Intelligence Unit, said this is the first month-on-month decline in real consumption this year and is unlikely to be the last.

She said spending recessions, especially consumer inflation expectations, will continue to have a significant impact on the Fed's future decision-making process on further rate hikes.

Earlier this year, the central bank abandoned its "easy money" policy, tackled rising inflation and launched a series of aggressive rate hikes to cool the economy. In March, the Fed raised interest rates for the first time since 2018, raising benchmark lending rates by 25basis points (0.25%). Then, a few weeks later, on May 4, it rose 50 basis points, and earlier this month it rose75 basis points.

Birch expects the Fed to return to a 50 basis point rise in the coming months as the Fed seeks to balance mixed economy data and respond without causing a recession. He said he was. The final first-quarter GDP readings for, released Wednesday, show that US economic growth has shrunk by 1.6%. Mortgage rates have fallen from 5.81% last week to 5.7%, according to Freddie Mac data released Thursday.

Federal Reserve Chairman Jerome Powell reiterated that central bank efforts affect demand, but not necessarily supply, and central banks contribute to inflation. I noticed a big impact.

Supply factors, especially global supply chain disruptions and ongoing labor shortages, have been found to be responsible for more than half the difference between 12-month PCE inflation and pre-pandemic inflation levels. Did. A survey released this month by the Federal Reserve Bank of San Francisco.