May Inflation Rates and the Fed: What You Need to Know

June 12, 2024
Andrew McVeigh
Federal Reserve, Housing, Inflation, US Economy

The rate of inflation slowed more than anticipated in May, but the Fed’s response holds steady.

Inflation numbers for the month of May were officially released today, with the Department of Labor announcing that the Consumer Price Index showed prices rose 3.3% in May on a 12-month basis, and 3.4% when excluding food and fuel prices. 

The numbers beat economists expectations, and are lower than March and April’s CPI rates for 3.5% and 3.4% respectively. On a month to month basis, inflation was at 0% and 0.2% when excluding food and Gas. 

Housing costs, which have a much more direct and potentially devastating effect on family budgets, accounted for more than two-thirds of the monthly increase. Rent costs increased by 0.4% in May and have risen by 5.3% over the past year. 

While the CPI numbers are better than anticipated, and certainly better than the 9%-10% inflation that was running rampant two years ago, it is important to remember that the current level of inflation still means that prices are increasing, straining the pocketbooks for everyday American families. 

In response to surging inflation, the Federal Reserve’s Federal Open Markets Committee (FOMC) sharply increased interest rates in 2022 and 2023 to levels not seen since the 1980s, aiming to decelerate the economy and curb inflation. 

The FOMC finished their June meeting on today as well. The meeting indicated the Fed only saw one Federal interest rate cut this year, tentatively penciling that in for later in the fall.

It remains to be seen if the hidden tax of inflation can be brought under control by the Fed’s efforts.

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