US consumer inflation cooled more than expected in May, offering relief to markets and adding pressure on the Federal Reserve to cut interest rates.According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose just 0.1% for the month, bringing the annual inflation rate to 2.4%. Economists had expected a monthly rise of 0.2%.
Core CPI, which excludes volatile food and energy prices and is closely watched by Fed policymakers, also increased 0.1% on-month and 2.8% on-year—both below forecasts of 0.3% and 2.9%, respectively. The overall CPI edged up from April’s annual pace of 2.3%, while core inflation held steady.
Falling energy prices were a key contributor to the softer reading, with gasoline tumbling 2.6% in May and down 12% year-on-year.Vehicle and apparel prices also declined, countering earlier expectations of tariff-related price jumps. Shelter costs rose 0.3% for the month, but the 3.9% annual rise was the slowest since 2021.
Core CPI, which excludes volatile food and energy prices and is closely watched by Fed policymakers, also increased 0.1% on-month and 2.8% on-year—both below forecasts of 0.3% and 2.9%, respectively. The overall CPI edged up from April’s annual pace of 2.3%, while core inflation held steady.
Falling energy prices were a key contributor to the softer reading, with gasoline tumbling 2.6% in May and down 12% year-on-year.Vehicle and apparel prices also declined, countering earlier expectations of tariff-related price jumps. Shelter costs rose 0.3% for the month, but the 3.9% annual rise was the slowest since 2021.
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Real average hourly earnings increased 0.3% in May and were up 1.4% year-on-year, as inflation-adjusted wages gained some ground.
Following the data release, Vice President JD Vance amplified President Trump’s ongoing demand for monetary easing. “The refusal by the Fed to cut rates is monetary malpractice,” Vance posted on X, asserting that inflation pressures “have failed to materialise.”
