Ahead of the U.S. Federal Reserve’s decision on the benchmark interest rate, CPI showed that U.S. inflation is steadily slowing down. The Fed, which has raised its key interest rate for 10 consecutive months since March last year, is also expected to freeze interest rates this week.
The U.S. Department of Labor announced on the 13th (local time) that the Consumer Price Index (CPI) rose 4.0% in May from the same month last year, indicating inflation slowing down.
This is lower than the annual CPI growth rate (4.9%) in April, the smallest increase in more than two years since April 2021. Compared to the previous month, it rose 0.1% and eased from April (0.4%).
This is in line with market forecasts. Based on estimates compiled by Dow Jones, the U.S. CNBC predicted that the CPI will rise 4.0% year-on-year and 0.1% month-on-month in May. The Wall Street Journal (WSJ) also predicted that the CPI will rise 4% year-on-year in May based on expert estimates.
The U.S. annual CPI growth rate continued to slow for 11 consecutive months after hitting a 20-year high of 9.1 percent in June last year.
Core CPI, excluding highly volatile energy and food, rose 5.3% from the same month last year and 0.4% from last month.
Experts analyzed that prices soared so much last year due to Russia’s invasion of Ukraine, which has a reverse base effect, and a drop in energy prices such as international oil prices last month also served as a downward factor in prices.
The May price index is expected to affect the Fed’s decision on the benchmark interest rate at a regular meeting of the Federal Open Market Committee (FOMC) on the 14th.
Earlier in the market, it was predicted that the Fed would skip this month’s rate hike once if the annual CPI growth slows to around 4.0%. JP Morgan diagnosed that the possibility of a rate freeze will increase if the annual CPI growth rate is between 4.0 and 4.2 percent in May.
However, experts predict that the FOMC will raise interest rates again in July even if the interest rate is decided to be frozen.
The Fed has raised the top of interest rates from 0.25% in March last year to 5.25% last month through 10 consecutive base rate hikes.
