Prices for eggs,
petrol and furniture dropped in the US last month, helping to slash inflation
to less than half of its peak a year ago.
Inflation, the
rate at which prices rise, was 4% over the 12 months to the end of May, the
Labor Department said.
That was down
from 4.9% in April and marked the 11th month in a row that price increases have
eased.
The update comes
as the US central bank meets to debate whether it needs to do more to fight
inflation.
Officials have
raised borrowing costs in the world's largest economy sharply since last year
to try to rein in prices, pushing the Federal Reserve's key interest rate to
more than 5%, from near zero in March 2022.
Analysts expect
the Fed to leave interest rates unchanged this month, reflecting the progress
made to ease price pressures as higher borrowing costs weigh on borrowing and
spending.
The price of
eggs has dropped 13.8% since last year - the biggest drop since 1951. Gasoline
prices are down nearly 20%.
Overall, at 4%,
inflation is the lowest it has been since March 2021, the Labor Department
said.
But the update
also showed that prices in many parts of the economy are still rising steadily
- and far faster than the 2% rate the Fed considers healthy.
In particular,
measures of housing costs, including rents, continue to climb sharply.
There have also
been steep price rises for beer, women's clothing, and services from car
maintenance to school fees.
"Don't be
fooled by the sharp fall in headline inflation, which is nearly all explained
by falls in gasoline prices. These numbers show underlying inflationary
pressures are still stubbornly high," said Brian Coulton, chief economist
at Fitch.
Inflation in the
US hit a peak of 9.1% in June 2022, as the war in Ukraine led to spikes in
energy and food prices. That was the fastest rate since November 1981.
Though the
problem has since subsided, some analysts say the Fed will have to do more to
get inflation under control.
So-called core
inflation, which is seen as a better gauge of underlying pressures because it
does not include changeable food and energy products, rose 0.4% from April to
May.
That pace has
held steady for three months in a row, the Labor Department said.
Alexandra
Wilson-Elizondo of Goldman Sachs Asset Management said she did not expect the
Fed to raise rates this week, but said the bank was likely to return to the
question when they meet in July.
"Today's...
number was a relief for the market, as the data met expectations, confirmed the
dis-inflationary trend, and re-affirmed current market pricing of a Fed pause
tomorrow," she said. "However, the rate of dis-inflation remains
incompatible with the Fed's 2% target."
She noted similar
that authorities in Australia and Canada recently increased rates after
pausing, citing stubborn inflationary pressures.
In Europe, the
European Central Bank is widely expected to raise rates at its
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