U.S. inflation cooled in May — though not on Long Island — in a sign that price pressures may be easing

WASHINGTON — Inflation in the United States eased in May for a second straight month, a hopeful sign an acceleration of prices that occurred early this year may have passed. The trend, if it holds, could move the Federal Reserve closer to cutting its benchmark interest rate from its 23-year peak.

The opposite occurred in the metropolitan area, including on Long Island: the Consumer Price Index here climbed 3.9% last month compared with May 2023. That rate of year-over-year growth was slightly higher than April's 3.8%, the Labor Department said on Wednesday.

Nationwide, prices excluding volatile food and energy costs — the closely watched “core” index — rose 0.2% from April to May, according to the department. That was down from 0.3% the previous month and was the smallest increase since October. Measured from a year earlier, core prices climbed 3.4%, below last month’s 3.6% rise, and the mildest such increase in three years.

Fed officials, who ended their latest policy meeting on Wednesday, are scrutinizing each month’s inflation data to assess their progress in the fight against rising prices. Even as overall inflation moderates, such necessities as groceries, rent and health care are much pricier than they were three years ago — a continuing source of public discontent and a political threat to President Joe Biden’s reelection bid.

Most other measures suggest the U.S. economy is healthy: Unemployment remains low, hiring is robust and consumers are traveling, eating out and spending on entertainment.

And Wednesday's report indicated consumers are beginning to get some relief from the price spikes of the past three years. Nationwide, grocery costs were unchanged, on average, from April to May, after actually falling 0.2% the previous month. Food prices have risen just 1% over the past 12 months, though they're still up about 20% from three years ago.

Average gas prices tumbled 3.6% nationally from April to May, though they're 2.2% higher than they were a year earlier.

Overall inflation also slowed last month, with consumer prices unchanged from April to May. Measured from a year earlier, prices rose 3.3%, less than the 3.6% increase a month earlier.

Most analysts said the inflation slowdown, if it continues, makes two interest-rate cuts more likely, probably starting in September.

In the metropolitan area, housing costs were a key factor behind the year-over-year increase in consumer prices in May compared with the decline nationwide, according to William J. Sibley, regional commissioner for the federal Bureau of Labor Statistics, which produces the price index.

Residential rents were up 4.4% last month compared with May 2023. The cost of electricity and natural gas also climbed 15.3% and 3.7%, respectively. Gasoline increased 3%.

“But the absolute levels of these prices remain high, which probably continues to exert a drain on consumer optimism and spending” on Long Island, said John A. Rizzo, an economist and Stony Brook University professor, adding consumers' perceptions about prices can dampen overall economic growth.

The cost of groceries increased 0.8% in May compared with a year earlier with the biggest price hikes for meat, poultry, fish, eggs and dairy products.

“With inflation still above the Fed’s target it is unlikely that interest rates will be cut anytime soon,” Rizzo told Newsday.

With James T. Madore