As the Federal Reserve decides if it will pause interest rate hikes Wednesday, it received confirmation that its efforts to rein in inflation may be paying off.
The Consumer Price Index released Tuesday by the U.S. Bureau of Labor Statistics showed annual inflation was brought down to 4 percent in May. It’s the lowest 12-month increase since March 2021.
The annual inflation rate was 4.9 percent in April and 5 percent in March.
The positive sign on inflation follows the Federal Reserve’s 10th rate increase in the past 14 months, including a third straight hike of one-quarter of a point. The current target range for federal funds is 5 to 5.25 percent.
But the annual inflation still remains well above the target of 2 percent.
The CPI rose 0.1 percent in May after the an increase of 0.4 percent in April.
“The index for shelter was the largest contributor to the monthly all items increase, followed by an increase in the index for used cars and trucks,” the BLS press release noted.
The index for used cars and trucks increased 4.4 percent, the same as for April.
For the year, used vehicles are still down 4.2 percent. Used vehicles have made a dramatic rise from being down 11.2 percent in March.
Other transportation costs continue to impact consumers. Car insurance increased another 2 percent in May and is up 17.1 percent in the past 12 months.