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US inflation eased to 2.6 per cent in the year to May, according to the metric the Federal Reserve uses to set its target for price pressures.
Friday’s data, published by the Bureau of Economic Analysis, on the personal consumption expenditures index was in line with economists’ expectations that headline US inflation would dip slightly from 2.7 per cent in April.
The Fed’s target for headline PCE index is 2 per cent a year.
“Core” PCE, which ignores changes in food and fuel prices, was 2.6 per cent, in line with expectations of economists polled by Reuters of a 0.2 percentage point drop from 2.8 per cent in April.
Fed officials’ next rate-setting vote is on July 31. Markets expect one quarter-point cut this year, with a slightly more than 50 per cent chance of the first being in September — the final policy decision ahead of the presidential election on November 5.
US stock futures held their gains after data. Contracts tracking Wall Street’s S&P 500 share gauge were up 0.3 per cent, while those tracking the technology-heavy Nasdaq 100 index rose 0.6 per cent.
Government bonds rallied slightly in the minutes immediately after the data release. The yield on the policy-sensitive two-year Treasury note was down 0.03 percentage points to 4.69 per cent, having been higher just before the figures landed. Bond prices rise when yields fall.
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