Households are getting a break from price hikes, as the rapid inflation that took hold in 2021 loses more steam.
The Consumer Price Index, a widely-watched measure of the cost of living, rose 4% over 12 months in May, the Bureau of Labor Statistics said Tuesday. That was down more than half from the 9.1% inflation peak logged less than a year ago in June 2022 and its lowest since March 2021. Put another way, the index only rose 0.1% over the month after rising 0.4% in April. Drivers got relief at the pump, with gas prices falling 5.6% since April, a major contributor to the cooling inflation trend.
The easing of price increases underscored how much progress has been made in the fight against inflation, especially for necessities like gas and groceries.
Prices for food at home were up 5.8% over the year in May, down from the 13.5% annual increase in August 2022. The Federal Reserve raised its benchmark interest rate for a 10th time in a row in May aiming to raise borrowing costs, discourage borrowing and spending, and slow the economy. This would bring supply and demand into balance and curtail price increases, according to the Fed.
With inflation continuing its slide toward the Fed’s goal of 2%, the central bank is now widely expected to put that campaign on hold, at least for now, and hold rates steady at its next meeting on Wednesday. Traders priced in a 94% chance the Fed will leave its interest rate flat, according to the CME Group’s FedWatch tool, which forecasts rate hikes based on Fed futures trading data.
Even amid the general easing, some price increases remained stubbornly high. “Core” prices, excluding the volatile food and energy categories, rose 0.4% in May, the same as they did in April and March, making for a 5.3% increase over the year.
Prices for used cars and trucks jumped 4.4% in May, piling on top of a same-sized increase in April. Shelter costs, which make up a major portion of the overall CPI, accelerated too, jumping 0.6% in May compared to a 0.4% increase in April. And car insurance rose 2% over the month, and is now up 17.1% over the year, its biggest annual increase since 1976.
Update - June 16, 2023: This article has been updated to use not seasonally-adjusted data to show the annual increase in motor vehicle insurance costs.