May inflation gauge dips, but remains near 40-year high

The preferred inflation gauge of the Federal Reserve came in slightly cooler than expected in May, but remains near a 40 year-high.

The Commerce Department said core prices, which excludes the more volatile measures of food and energy, climbed 0.3% month over month, and rose 4.7% year over year in May. Economists surveyed by Refinitiv were expecting a 0.4% month-over-month increase and a 4.8% year-over-year increase in May.

Headline inflation went up 0.6% for the month, faster than April's 0.2% gain. The headline inflation held steady between April and May at 6.3% a year over year, but is down slightly from March's 6.6%.

The consumer price index hit a new 40 year high in May, rising 8.6% year-over-year, the fastest inflation since December 1981, according to the latest inflation data.

Personal income increased by 0.5% in May, in line with expectations, while spending rose 0.2%, slightly less than the 0.4% increase expected, according to the government's data. The personal savings rate hit 5.4% in May, compared to 5.2% in April.

The Conference Board reported on Tuesday that it fell to a reading of 95.2 in June, the lowest level since February 2021, the lowest level since February 2021. The survey found that 19.6% of respondents view current business conditions as good compared to 23% who said they were bad. In the short-term, about 15.9% of consumers expect their incomes to increase, while 15.2% expect their incomes to decrease.

The Conference Board's senior director of economic indicators Lynn Franco said that consumers' grimmer outlook was driven by rising gas and food prices. Expectations have fallen well below the reading of 80, suggesting weaker growth in the second half of 2022 as well as a growing risk of a recession by the end of the year. The Fed officials increased their holdings by 75 basis points for the first time since 1994 earlier this month. The key federal funds rate is the highest since the epidemic began two years ago, between 1.50% and 1.75%.

Federal Reserve Chairman Jerome Powell told reporters at a press conference after the policy-setting meeting that another increase of 75 basis points or 50 basis points is on the table for July. The federal funds rate is expected to hit 3.4% by the end of the year and 3.8% by the end of 2023, a big increase from their March projections.