Annual inflation rate dips to 3.3% above Fed’s target

The U.S. consumer price index, the government’s top measure for inflation, remained unchanged in May, indicating that prices for goods and services stayed relatively constant compared to April. Over the 12-month period ending in May, the price of goods and services increased by 3.3%, as per government data. The new inflation data was released by the Bureau of Labor Statistics on Wednesday.

Inflation rates for the 12-month periods ending in April and March were 3.4% and 3.5% respectively. The consumer price index assigns weights to different goods based on their importance, with items like food, shelter, and energy carrying heavier weights.

Good news for consumers is that food inflation for items purchased at grocery stores has been low. Food meant for consumption at home saw a 1% increase over the 12-month period ending in May, a significant drop from the double-digit food inflation seen in previous years. Major chains like Walgreens and Target have announced price reductions on various items.

Dining out has become more expensive, with costs for eating away from home rising 4% this year compared to last year. Some fast food chains are introducing value meals to attract customers amid inflation concerns.

On the downside, shelter prices continue to increase, with shelter costs in May 2024 being 5.4% higher than a year earlier. May marked the 13th consecutive month with a consumer price index ranging between 3% and 4%. The Federal Reserve has maintained high interest rates since late 2023 in an attempt to curb inflation.

The Federal Reserve is expected to announce possible changes to the inflation rate on Wednesday, though the federal interest rate has remained steady in 2024. Despite inflation, wages are exceeding inflation rates, with average weekly earnings increasing by 3.8% in the last year, according to the Bureau of Labor Statistics.