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US inflation fell to 3.3 per cent in May, in a fillip to Joe Biden as Federal Reserve officials prepare to outline their plans for interest rate cuts this year.
The Bureau of Labor Statistics’ figure for the annual rise in consumer prices was marginally lower than economists’ expectations that inflation would remain flat at 3.4 per cent.
Core CPI, which strips out changes for food and energy prices, hit 3.4 per cent, below expectations of a slight fall to 3.5 per cent.
Treasury yields fell and stock futures rose following the release, as investors bet on more interest rate cuts this year.
Traders in the futures market fully priced in two cuts this year, compared to between one and two previously according to LSEG data.
Biden has been seeking to persuade voters hit by successive price rises of his economic credentials.
The Fed is set to leave interest rates on hold at their 23-year high of 5.25 to 5.5 per cent, in an announcement due later on Wednesday.
The central bank will also publish its projection, or “dot plot”, for how many times it intends to cut borrowing costs this year.
In March, the Fed said it expected to cut rates three times this year. Investors are now pricing between one and two quarter-point reductions this year.
While the Fed’s preferred inflation gauge is the personal consumption expenditures figure, CPI data still has an impact on the central bank’s approach to cutting rates.
This is a developing story
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