US Inflation Rate Today: Latest Numbers and Trends

Lower gasoline prices likely helped slow U.S. consumer inflation in May. When the government releases its latest monthly price report on Wednesday, investors and Federal Reserve officials will be watching especially closely the measure that excludes volatile food and energy prices—commonly referred to as “core” inflation.

Core inflation and the pressure of rising costs

Economists surveyed by FactSet expect core consumer prices to have risen 0.3% from April to May, matching the prior month’s increase. On a year-over-year basis, core inflation is projected to have eased slightly, from 3.6% to 3.5%.

Even as headline inflation cools, many everyday essentials remain significantly more expensive than they were a few years ago. Groceries, rents and health-care costs have risen markedly, and those cumulative price increases continue to weigh on household budgets and consumer sentiment. That strain on living costs is a persistent political concern and could influence public perceptions ahead of elections.

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How the Fed reads inflation

The Federal Reserve closely examines each monthly inflation report for signs that price pressures are easing toward the central bank’s 2% objective. A monthly core rise of 0.3% sustained over time would be higher than what’s consistent with that target, and could disappoint policy makers. Still, Fed officials often emphasize a different inflation gauge that typically reports slightly lower readings than the consumer price index.

Policymakers are expected to conclude their two-day policy meeting on Wednesday, just after the release of the May price figures. Most officials are widely anticipated to leave the benchmark interest rate unchanged at a roughly 23-year high near 5.3%.

Falling gasoline costs are believed to have pulled headline inflation down to about 0.1% month-over-month in May, according to data-provider estimates—making it the smallest monthly increase since October. On a year-over-year basis, consumer prices are thought to have risen about 3.4% in May, roughly the same pace as in April.

The balancing act: higher rates versus economic risk

The Fed’s challenge is that keeping interest rates elevated helps slow borrowing and spending, which should temper price increases, but doing so for too long risks weakening the economy and potentially triggering a recession. Conversely, easing policy too soon could allow inflation to accelerate again. Many Fed members have said that their current policy stance is slowing growth and should, over time, bring inflation down.

Can the U.S. achieve a soft landing?

During the latter half of last year, the steady decline in inflation raised hopes the Fed might achieve a “soft landing”—cooling price gains without tipping the economy into recession. Achieving that outcome is difficult and uncommon. Early this year some inflation readings surprised on the upside, which delayed expectations for interest-rate cuts and made a soft landing less certain.

Fed Chair Jerome Powell has said the central bank needs greater confidence that inflation is moving sustainably toward target before trimming rates. Several officials have stressed the need to see multiple consecutive months of declining inflation to build that confidence.

What’s expected to move prices

Alongside lower gasoline costs, economists forecast price declines in categories such as clothing, furniture and new cars from April to May. Used-car prices may have ticked up after several months of declines, though analysts often view those changes as temporary. Rent inflation—a major driver of overall inflation—may also cool slightly in the months ahead.

Some components have moved in the opposite direction: for example, auto insurance costs showed notable monthly increases in recent months, though those gains appear to be moderating.