US Fed's preferred inflation indicator softens in May

By Ovunc Kutlu

ISTANBUL (AA) - The US Federal Reserve's preferred inflation indicator softened in May both annually and monthly, according to the Commerce Department figures released Friday.

The core personal consumption expenditures (PCE) price index rose 4.6% annually in May, down from a 4.7% year-on-year gain in April, and came lower than the market expectation of a 4.7% increase.

On a monthly basis, the index rose 0.3% in May, also softening from a 0.4% monthly gain in April, and lower than the market expectation of a 0.4% increase.

"The $18.9 billion increase in current-dollar PCE in May reflected an increase of $52.0 billion in spending for services that was partly offset by a $33.1 billion decrease in spending for goods," the Commerce Department said in a statement.

"Within services, the leading contributors to the increase were health care, led by outpatient services, other services, led by international travel, and transportation services, led by air transportation," it added.

On a monthly basis, food prices increased 0.1% but energy prices decreased 3.9%, according to the figures.

The PCE price index, which includes food and energy prices, rose 3.8% annually in May, also easing from a 4.3% year-on-year gain in April, and coming lower than the market estimates of a 4.6% increase.

On a monthly basis, the index rose 0.1% in May, down from a 0.4% month-on-month gain in April, and also coming lower than the market estimates of a 0.5% increase.

The Fed skipped an interest rate increase at the conclusion of its last two-day meeting on June 14, as widely expected, and kept the federal funds rate unchanged between 5% -5.25%.

Fed Chair Jerome Powell, however, later signaled that the central bank can make two more interest rate increases in the remainder of this year in order to further slow inflation down.