US. Core inflation shows signs of livelihood as Fed evaluates interest rate cut
(Bloomberg) – The US Federal Reserve's preferred measure of underlying US inflation showed signs of an increase in May towards the central bank target, possibly raising the bar for interest rates was cut at political decision-makers late next month.
The food-and-energy indicator grew 0.2% mom from the previous month, according to a Friday's Department of Commerce report. Annual growth in a Bloomberg survey was just above the median estimate, and the three-month increase on an annualized basis rose to around 2%, a five-month high slightly below estimates, after a revised up 0.6 % in April. Personal income rose for a second month, exceeding forecasts, even though wages rose at the slowest pace in six months.
While Friday's numbers alone are not likely to spur the Fed to trade in one way or another, a steady stream of positive economic data is expected News in the coming weeks could push policymakers to lower interest rates despite the pressure of the financial markets and of President Donald Trump. Higher consumer spending and higher incomes should support future growth as July's expansion becomes the longest in US history.
Earlier this week, Powell said the latest data showed that inflation may "last longer than we had hoped", he said, officials said the subdued inflation was likely to be temporary.
The more general PCE price index, which the Fed is officially targeting for 2% inflation, edged up 0.2% month-on-month, up 1
In their quarterly forecasts last week, Fed officials lowered their forecasts for overall PCE inflation to 1.5%. this year to 1.8% in core PCE prices.
According to Friday's report, inflation-adjusted expenditure rose by 0.2% for a second month, which was less than estimated, although the April figure reflected an upward correction. According to the report, the increase in May was due both to new motor vehicles and to food and accommodation expenses.
- The personal savings rate was 6.1%, reaching its lowest level since November  Adjusted for inflation, disposable income rose 0.3%, the fastest pace this year.
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