The Federal Reserve’s favorite inflation gauge flatlined in May, according to new federal data released Friday.
Prices rose 0 percent in May and were up 2.6 percent from a year ago, according to the Commerce Department’s personal consumption expenditures (PCE) price index.
“Core” PCE inflation, which excludes more volatile food and energy prices, was just 0.1 percent from April to May and also fell to 2.6 percent year-over-year.
The latest inflation print comes amid a protracted plateau in the central bank’s battle to further cool once-scorching price growth, and rising political pressure related to the economy and inflation as the November election nears.
Former President Trump claimed President Biden “caused the inflation” during the first presidential debate Thursday night, saying “there was no inflation” during his administration.
The pandemic did disrupt decades of low inflation, which measured 1.4 percent year-over-year when Biden took office in January 2021. Inflation peaked at 9.1 percent in June 2022 but has since fallen, clocking in at 3.3 percent annually in May, according to the Labor Department’s latest consumer price index (CPI) print.
But a number of factors played into the spike in prices not seen since the 1980s including seismic supply chain disruptions as a result of the pandemic and Russia’s invasion of Ukraine that hit energy prices particularly hard. Reopening the economy after the pandemic, and subsequent spending of stimulus distributed under both administrations, pushed the economy into overdrive.
The Fed hiked interest rates to a 23-year high, ballooning borrowing costs in a bid to cool the economy. While the Fed signaled rate cuts on the horizon at the end of 2023, when inflation fell rapidly, flatlining inflation readings have extended the timeline for potential rate cuts.
A majority of interest rate traders don’t expect the Fed to start cutting rates until at least September, according to the CME FedWatch Tool.
