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June 17, 2019 — CPI Barely Moves Up in May: Are Lower Rates Ahead?

JUNE 17, 2019 – CPI BARELY MOVES UP IN MAY; ARE LOWER RATES AHEAD?

US consumer prices rose by 0.1 percent last month.  In the 12-months through May, CPI was up 1.8%, marginally lower than April’s 1.9% gain. The Fed looks to the PCE price index as its preferred inflation measure; it is currently running at 1.6%, well below the Fed’s 2% target rate.  The ongoing moderately paced inflation with a slowing economy, could increase pressure on the Fed to lower interest rates this year. 

The US economic expansion is about to become the longest since the second World War as it turns 10 years old. Growth is moderating, but this doesn’t mean a recession is on the horizon. Good decision making by the Fed, the settling of trade tensions and consumer spending should keep the good times going. A slow-growth economy is less likely to develop imbalances, which will allow the Fed to act in a timely manner.

Fed policymakers meet this week.  Financial markets are anticipating as many as two interest rate cuts before the year is out, though it is unlikely the first cut will take place this week.