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US inflation rose less than expected to 2.4 per cent in May, even as President Donald Trump’s trade war fuels price pressures.
Wednesday’s annual consumer price index figure was below the 2.5 per cent predicted by analysts surveyed by Bloomberg, but above the 2.3 per cent recorded in April.
The core measure, which strips out changes in food and energy prices, remained flat at 2.8 per cent, against expectations of a slight rise.
Inflation is expected to increase further in the coming months as the impact of Trump’s tariffs, which were unveiled in April, is passed on to consumers and businesses in the world’s largest economy.
The US currently applies a 10 per cent fee to most imports, as well as much higher levies on goods from China.
The US two-year Treasury yield, which generally moves with expectations for monetary policy, dropped almost 0.1 percentage point following the report to below 3.95 per cent. US stock-index futures jumped, with those tracking the S&P 500 up 0.4 per cent. The dollar index was down 0.4 per cent.
Still, the US Federal Reserve is expected to hold borrowing costs at between 4.25 per cent and 4.5 per cent when it meets next week, in anticipation of further rises in inflation.
Trump has heaped pressure on Fed chair Jay Powell to follow the lead of the European Central Bank and the Bank of England and cut borrowing costs this year, pushing for a full percentage point cut and calling Powell “a disaster”.
The Fed’s preferred inflation measure, the personal consumption expenditures index, fell to 2.1 per cent in April, but is also expected to rise in the months ahead.
This is a developing story
