Prices for physical goods fell 0.4 percent from April to May. Gasoline prices dropped 3.4 percent, furniture prices fell 1 percent, and recreational goods and vehicles saw a 1.6 percent decline. On the other hand, prices for services, such as restaurant meals and airline fares, increased by 0.2 percent.
The latest figures will likely please the Fed’s policymakers, who seek confidence that inflation is slowing towards their 2 percent target before cutting interest rates. Economists predict rate cuts by the Fed could start in September, leading to lower borrowing rates for consumers and businesses.
“If the trend we saw this month continues consistently for another two months, the Fed may finally have the confidence necessary for a rate cut in September,” wrote Olu Sonola, head of US economic research at Fitch Ratings, in a research note.
The Fed raised its benchmark rate 11 times in 2022 and 2023 to curb the worst inflation streak in four decades. While inflation cooled significantly from its 2022 peak, average prices remain well above pre-pandemic levels, frustrating many Americans and posing a potential threat to President Joe Biden’s re-election bid.
During Thursday night’s presidential debate, Donald Trump criticized Biden’s handling of inflation, asserting that prices “blew up under his leadership.”
