The Federal Reserve’s preferred measure of underlying U.S. inflation decelerated in May, bolstering the case for lower interest rates later this year.
At the same time, household spending rebounded after a pullback in April, and incomes showed solid growth, offering some hope that price pressures can be tamed without lasting damage to consumers.
According to Bureau of Economic Analysis data out Friday, the so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.1% from the prior month. That marked the smallest advance in six months. On a two-decimal basis, it was up just 0.08% – the least since late 2020.
Inflation-adjusted consumer spending growth was driven by goods and fueled in part by the jump in incomes. The combination of slower price increases and robust spending offers some relief for Fed officials after an array of reports pointed to a loss of economic …