Core Consumer Prices in U.S. Increased Less Than Forecast in May

U.S. Consumer Prices Rise 0.4% in MayThe cost of living in the U.S. rose less than expected in May, which could force policy makers at the Federal Reserve to push back on raising interest rates even further.

The Consumer Price Index (CPI), which measures prices households pay on goods and services throughout the economy, rose 0.4% in May, as fuel costs rebounded. However, after stripping out volatile items like food and energy, prices only rose 0.1% in May. The number represented the smallest rise in prices this year after climbing 0.3% in April. (Source: The U.S. Bureau of Labor, June 18, 2015.)

The CPI has now risen for four straight months after falling from November through January. The decline was largely caused by the crash in oil prices which topped $107.28 last summer but dropped to as low as $42.10 earlier this year. Since then, oil prices have stabilized around $60.40.

Another report shows fewer Americans filed for unemployment insurance last week, reflecting that jobless claims remain below 300,000 for the 15th straight week. The number of applications for unemployment insurance payments declined by 12,000, the biggest decline over the past three months. (Source: U.S. Department of Labor, June 18, 2015.)

Federal Reserve Outlook

At a press conference after the Wednesday meeting, Fed Chair Janet Yellen said that Federal Reserve officials are seeking a firmer inflation before raising the federal funds rate.

Yellen added that the below-target inflation partly reflects declines in energy prices and imports.

“I think that’s serving to push down core inflation a little bit,” Yellen stated. “Eventually I expect that impact to ebb, but it is a factor affecting the outlook.”

The Federal Reserve left the rates unchanged but signaled that the federal funds rate will go up this year if the labor market remains strong and inflation hits the Fed’s target.