Jun 28, 2024 - Economy

Fed's go-to inflation gauge falls to lowest level since 2021

Courtenay Brown

Person with shopping bag — A shopper exits an Aldi supermarket in Alhambra, Calif. Photo: Eric Thayer/Bloomberg via Getty Images

The Federal Reserve's preferred measure of inflation showed prices in aggregate barely budged in May, while annual measures hit the lowest level in over three years, the government said on Friday.

Why it matters: Inflation was benign last month, as the Consumer Price Index report released earlier this month indicated — a turnaround from early 2024 when it looked like progress had stalled out.

By the numbers: The Personal Consumption Expenditures index was flat last month, while the core measure that excludes volatile energy and food prices edged up just 0.1%.

Both measures increased 2.6% in the 12 months through May, the lowest since March 2021.

Zoom in: The data released on Friday also showed consumer spending picked up slightly in May. But shoppers still look more cautious compared to earlier this year.

Personal consumption expenditures rose 0.3%, adjusted for inflation. That compares to the decline of 0.1% in April.
That came alongside a jump in disposable personal income, which rose an inflation-adjusted 0.5% — the biggest jump in over a year. In April, disposable income was flat.
The personal saving rate edged higher to 3.9%, an increase of 0.2 percentage point from April.

The bottom line: Taken together, the slate of data shows the economy has shifted into a cooler state—with more muted consumer spending—alongside slower price increases.

Go deeper... Inflation blame game: Who Republicans, Democrats say is driving high prices

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Fed's go-to inflation gauge falls to lowest level since 2021

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