Inflation slowed sharply in May in the United States, to its lowest level in more than two years, good news for the purchasing power of Americans, but also for the American central bank (Fed), which begins its meeting on Tuesday , and may not raise rates.
Consumer prices increased by 4.0% over one year against 4.9% in April, according to the CPI index published Tuesday by the Department of Labor, and on which pensions are indexed. That’s in line with analysts’ expectations, and it’s the lowest level since March 2021.
Inflation is now half as high as in July 2022, when it was at its highest, at 9.1% over one year, unheard of for more than 40 years.
Housing prices remain the main contributor to this inflation, and used car prices have also climbed.
On the other hand, energy prices fell by 3.6% over one month, and even by 11.7% over one year.
Over one month alone, the rise in consumer prices was 0.1% against 0.4% in April. The slowdown is stronger than expected, since analysts expected 0.4%, according to MarketWatch consensus.
Excluding volatile food and energy prices, so-called core inflation remained stable over one month, at 0.4%, and slowed to 5.3% over one year.
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These data are published on the first day of the meeting of the American central bank (Fed). And, although inflation is still too high for its liking, the sharp drop in inflation could convince it not to raise rates, for the first time since March 2022.
The Fed has been trying for more than a year to put an end to this surge in prices. To do this, it has a very effective tool, but one that is delayed: the rise in interest rates.
It raised them ten times, to push the commercial banks to raise in turn the interest rates on the loans they grant to households and companies.
This aims to discourage consumption — in a country where many purchases, even small ones, are made on credit — and investment. This deliberate slowdown in economic activity must, ultimatelyease the pressure on prices.
But it takes months for the full effects of these measures to be felt in the real economy.
The Fed’s decision will be announced on Wednesday after its meeting.
Several officials now want to take the time to observe the effects of these successive increases. And avoid too much of a rise, or too hasty a rise, which would precipitate the American economy into recession.
Especially since the spring banking crisis has made banks more cautious about loans, which acts as a rate hike.
The Fed favors another measure of inflation, the PCE index. This is published at the end of the month. It was, in April, started to rise again, to 4.4% over one year, and it wants to bring it back to 2.0%, a level considered healthy for the economy.