US consumer price growth slowed last month as inflation shows signs of steady decline

WASHINGTON — Consumer prices in the United States cooled last month, rising just 0.1% from April to May and extending the past year's steady easing of inflation. At the same time, some measures of underlying price pressures remained high.

Measured year over year, inflation slowed to just 4% in May — the lowest 12-month figure in over two years and well below April’s 4.9% annual rise. The pullback was driven by tumbling gas prices, a much smaller rise in grocery prices than in previous months and less expensive furniture, air fares and appliances.

Tuesday’s inflation figures from the government arrived one day before the Federal Reserve is expected to leave interest rates alone after imposing 10 straight rate hikes dating back to March 2022. After a two-day meeting, the Fed will likely announce that it’s skipping a rate hike but may hint that it will resume raising rates as soon as July.

In the New York area, including Long Island, consumer prices climbed 3.5% in May compared with a year earlier. It was the smallest year-over-year increase since July 2021, according to William J. Sibley, regional commissioner for the federal Bureau of Labor Statistics, which produces the consumer price index.

He said housing costs “influenced” the index’s rise last month compared with May 2022. Residential rent was up 6%. There also were large year-over-year price increases for automobiles and education expenses such as school tuition, up 8.7% and 2.6%, respectively. But the cost of gasoline fell 23.4%.

“While overall inflation has continued to decline in the New York metro area, this varies widely…Gasoline prices have dropped substantially, but there were large year-over-year increases in the cost of rent, motor vehicles and education,” said John A. Rizzo, an economist and Stony Brook University professor. “This means that despite the overall decline in inflation, rising costs remain a significant challenge for many Long Islanders.”

Last month’s drop-off in overall inflation isn’t likely to convince the Fed’s policymakers that they’re close to curbing the high inflation that has gripped the nation for two years. The central bank tends to focus most closely on “core” prices, which exclude volatile food and energy costs and are considered better able to capture underlying inflation trends. These prices remain stubbornly high.

Core prices rose a sizable 0.4% from April to May, the sixth straight month of increases at that level or higher. Compared with a year ago, core inflation slipped from 5.5% to 5.3% but is still far above the Fed’s target of 2%.

Yet some positive signs, even in the measures of core prices, suggest that underlying inflation pressures may be receding. The outsize increases in core prices were driven mainly by rising rents and by another spike in used car prices. Real-time data suggests that increases in those categories will soon ease and help cool inflation.

“Outside of those two components, the trend has become very encouraging,” Stephen Juneau, an economist at Bank of America, said in a research note. “We should continue to see improvement in core" prices.

Economists say inflation is being driven by a narrower set of goods and services. Excluding housing costs — which include rents and hotel prices, which jumped last month — prices actually dipped 0.1% from April to May. And they're up just 2.1% from a year ago.

Still, the stubbornness of underlying inflation reflects a fundamental challenge for the Fed: The economy has steadily defied long-standing forecasts for a recession, dating back more than a year. Instead, businesses have kept hiring at a healthy pace, average paychecks are climbing and workers are freely spending their larger wages.

With James T. Madore