US price growth eased to 4% in May – E24

It is the lowest inflation rate measured by the consumer price index in the past two years.

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Price growth in the United States ended at 4 percent in May, compared to the same month a year earlier. This is what the latest numbers showed US Department of Labor.

This is the lowest inflation rate measured by the consumer price index in two years. You have to go back to March 2021 to find lower price growth in the US compared to the previous year.

Previously, economists had believed inflation would fall at 4.1 percent, according to a survey of economists by Bloomberg.

Transport and food prices in particular contributed to the price hike, while energy prices contributed to weakening inflation.

Core inflation, which excludes energy and food products, was expected to fall at 5.2 percent. The result was that it barely rose to 5.3 per cent.

Doesn’t mean that the interest rate hike is over

– I think this is in line with a break in interest rates after the next meeting, Nordea Markets chief economist Eric Bross tells E24.

He believes that the market will now price in if the interest rate is broken, and that the US central bank, the Federal Reserve (Fed), will follow suit.

– It goes with the signs they gave, he says.

Bruce points out that Fed Chairman Jerome Powell has indicated that it is time to move forward quietly and assess the impact of rate hikes.

This does not mean that interest rate increases are over. But we need to see clear signs of inflation slowing. The chief strategist says a break won’t mean it’s over.

Now, he believes, there are many indications that interest rates are nearing a peak.

– A less tight labor market, growth figures that are not great, and buying indicators that indicate a slower pace in the economy and that banks are tightening lending, perhaps indicating that we are close to the peak of interest rates.

The price is at the interest rate break

The interest rate in the US is now in the range of 5-5.25 per cent.

Before today’s inflation numbers were released, the market had priced a rate break at the next interest rate meeting in June with a probability of 81.5 percent, according to CME Fedwatch tool.

After about 20 minutes, that probability increased to 99.5 percent.

At the previous meeting, the FOMC (Federal Open Market Committee) Interest Rate Committee was divided on whether to raise rates, according to the minutes.

Although the committee settled on a “modest” increase last time, it was indicated that economic activity increased at a modest pace in the first quarter.

On the flip side, the jobs numbers specifically, which the Nonfarm Payrolls report presents, was said to have remained strong.

Calmed down in April

In April, price growth in the world’s largest economy eased to 4.9 percent, from just under 5 percent in March.

It was marginally weaker than the 5 percent advance economists had expected.

Core inflation was slightly higher, closing at 5.5 percent in April. Hence, it also came in slightly weaker than the expected 5.6 percent.

The Federal Reserve has raised interest rates several times in the past year in an effort to rein in inflation. Like the Bank of Norway, the US central bank has an inflation target of 2 percent.