The inflation rate in the US hasn’t actually been through great times recently, generally speaking. If we only look at the past decade, we realize that the country has been through a significant surge in its annual inflation rate, as it grew from 3.2 percent back in 2011 all the way to 8.3 percent as it was reported in 2022. The alarming inflation obviously indicates a decline in the power and influence of the US dollar.
For May 2023, consumer prices in the US have been through a slowdown. The situation marks the lowest increase since April 2021. At the same time, inflation proved signs of cooling across the month of May 2023, as Yahoo Finance reveals.
The Consumer Price Index (CPI) showed a 0.1% increase compared to the previous month and a 4% increase compared to the previous year. These figures align closely with the predictions of economists. However, despite the slowdown, the inflation rate remains significantly above the target of the Federal Reserve of 2%. Core inflation, which excludes volatile costs such as food and gas, rose by 0.4% month-over-month and 5.3% year-over-year.
Rent prices continued to surge, contributing to the core inflation that remains persistent. The energy index decreased while the food index rose, with notable drops when it comes to egg prices. The release of the new data will influence the Federal Reserve’s upcoming monetary policy decision. Market expectations indicate a high probability of interest rates remaining unchanged in June.
Gargi Chaudhuri, who’s BlackRock’s head of iShares investment strategy, wrote in a new note as Yahoo Finance quotes:
We think the Fed will pause their rate hikes tomorrow and will keep the doors open for potential rate increases in the future if economic data necessitates it.
They will buy themselves the maximum amount of optionality by signaling at least one further hike by the end of 2023, aligned with market expectations, and will guide towards a ‘skip’ instead of an extended pause to sit and observe the effects of raising rates 5% since the beginning of the hiking cycle.
Stay tuned for more news on the subject!