US consumer prices were unchanged in May amid cheaper gasoline prices, but inflation may still be too high for the Federal Reserve to start cutting interest rates before September against a backdrop of a firm labor market.
The reading was unchanged for consumer price index data reported by the Labor Department's Bureau of Labor Statistics on Wednesday after a 0.3% increase in April.
The CPI has shown a downward trend since recording strong readings in February and March. Price pressures could continue to ease as major retailers, including Target, cut prices on everything from food to diapers in an effort to lure inflation-weary consumers.
In the 12 months to May, the CPI rose 3.3% after rising 3.4% in April. Economists polled by Reuters had forecast CPI rising 0.1% and rising 3.4% year-on-year.
Although the annual increase in consumer prices has slowed from a peak of 9.1% in June 2022, inflation is still running above the US central bank's 2% target.
Job growth picked up in May and wages rose, but the unemployment rate rose to 4%, the government reported last week. Fed officials are expected on Thursday to leave the central bank's benchmark overnight interest rate unchanged in the current range of 5.25%-5.50%, where it has been since July.
The Fed has raised policy rates by 525 basis points since March 2022.
Financial markets expect the Fed to begin its easing cycle in September, although that confidence is waning. Some economists are leaning toward a rate cut in December, but others are not so sure that borrowing costs will be lowered this year.
Excluding volatile food and energy components, CPI rose 0.2% in May after rising 0.3% in April.
In the 12 months to May, core CPI rose 3.4%. It was the smallest year-on-year increase since April 2021 and was followed by a 3.6% increase in April.
