Is Inflation easing in the US?

The Federal Reserves target of 2% is still a work in progress however the US is seeing some easing in consumer price pressures. They remain cautious that this is a lasting ease before they cut interest rates from the current rate of 5.25%-5.5% which has been held since last July. The next meeting will be in June where they will announce any cuts or changes.

The Consumer Price Index (CPI) increased by 0.3% in April month on month, this was 0.4% in the month previously showing a slow-down. This was 3.4% Year on Year in April down from 3.5%.

This is the first slowdown of the year for US inflation.

 

What areas are causing inflation easing?

According to Reuters, the cost of rent and other shelter increased 0.4% for three months in a row, the price of gas also rose by 2.8. These contributed over 70% of the increase in the CPI. Grocery shopping at supermarkets saw prices falling by 0.2% with eggs, meat, fish, fruit and vegetable all being cheaper. Whereas cereals, bakery items and dairy products rose in price.

Retail sales were lower than previously potentially reflecting consumers cutting back due to the cost of living.

Prices increases are slowing in auto-repair from the high prices due to high demand as more people buy second hand vehicles.

 

Could the Federal Reserve’s cut rates?

If inflation continues to ease and head towards their target of 2% the US could see cuts in interest rates. This would reduce prices of mortgages, credit cards, auto loans and other forms of borrowing making that much easier for people to get on the property market.

Inflation cooling means the US could be on the way to hitting the 2% target with prices coming down slowly.

 

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