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In May, energy prices declined, lowering U.S. import prices for the first time in five months and boosting domestic inflation.
Friday’s unexpectedly benign Labor Department report and this week’s statistics showing low inflation last month keep a September Federal Reserve interest rate drop on the table.
A Friday survey found consumer morale at a seven-month low in June, despite signs of inflation easing. On Wednesday, the U.S. central bank delayed rate cuts until December, predicting only one quarter-percentage-point cut this year.
“Fed officials did not see what they were hoping for in the inflation trend when they met earlier this week, but bearish inflation outlooks are changing,” said FWDBONDS chief economist Christopher Rupkey.
“September could be the first rate cut. The drop in imported goods prices will please inflation-weary consumers.”
The Labor Department’s Bureau of Labor Statistics reported a 0.4% decline in import prices last month, following an unrevised 0.9% increase in April. Import prices fell for the first time since December. Reuters economists predicted a 0.1% increase in tariff-free import costs.
Like in April, import prices rose 1.1% in the year through May. Imported fuel prices fell 2.0% in May after rising 4.1% in April. Price drops for crude oil and natural gas were sharp.
Imported food prices fell 1.6% after gaining 1.3% in April. Imported capital goods prices declined by 0.1% last month, erasing April’s 0.1% rise. Vehicle, part, and engine prices fell 0.1% after gaining 0.4% in April.
third month of a 0.2% decline in imported consumer goods prices.
Import prices declined by 0.2%, excluding energy and food. Core import prices rose 0.6% in April. They appeared despite the dollar’s gains against the US’s key trading partners’ currencies this year.
May core import prices rose 0.1% annually.
The sun rises above Oakland Port cranes and a container ship.
The dollar rose versus a basket of currencies. U.S. Treasury prices surged as stocks fell as investors booked profits from a rally.
The Fed maintained its benchmark overnight interest rate at 5.25%–5.50% on Wednesday, as it had since July. Economists and financial markets expect the Fed to start its easing cycle in September and cut borrowing prices twice. The Fed hiked rates 525 basis points since March 2022.
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