2 days Ago By The Frontier Post
WASHINGTON (Reuters): US monthly inflation was unchanged in May as a modest increase in the cost of services was offset by the largest drop in goods prices in six months, drawing the Federal Reserve closer to start cutting US interest rates later this year. The report from the Commerce Department on Friday also showed US consumer spending rose marginally last month. Underlying prices advanced at the slowest pace in six months, raising optimism that the central bank could engineer a much-desired “soft landing” for the economy in which inflation cools without triggering a recession and a sharp rise in unemployment.
Traders raised their bets for a Fed rate cut in September. “This was a very Fed-friendly report that should keep the September rate cut in play, while at the same time increasing investor confidence that moderate economic growth can be maintained even as rates stay higher for longer,” said Scott Anderson, chief US economist at BMO Capital Markets. “The sharp slowdown in core inflation is just what the doctor needed to see to keep the economy on the soft-landing glide-path.
” The flat reading in the personal consumption expenditures (PCE) price index last month followed an unrevised 0.3 per cent gain in April, the Commerce Department’s Bureau of Economic Analysis said. It was the first time in six months that PCE inflation was unchanged.
Goods prices fell 0.4pc, the biggest drop since November. There were big declines in prices of recreational goods and v.
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