The Federal Reserve’s preferred measure of inflation retreated in May, casting further doubt on the chances for another interest rates increase this year, according to Commerce Department data released Friday.
The report also showed a slowdown in consumer spending last month, which could be a drag on economic expansion in the second quarter.
The Personal Consumption Expenditures price index, which tracks the cost of goods and services purchased by individuals, fell by 0.1 percent compared to April, the second decline so far this year.
The so-called core measure, which excludes food and fuel, added a token 0.1 percent for the month, the same pace as in April.
The less volatile 12-month measure also slowed to 1.4 percent, down three-tenths from April’s reading and slipping even further from the Fed’s two percent target.
This measure has declined steadily since February and is now at its lowest level since November.
The core 12-month measure likewise gained 1.4 percent, down a tenth from April and the lowest since December 2015.
Despite the lack of upward price pressures, the Fed raised the benchmark lending rate this month, in an expression of confidence that a growing economy would push prices up in the medium-term.
The personal income and outlays report also showed incomes were rising but this was translating into increased savings, rather than fueling spending.
Adjusted for inflation, disposable incomes rose 0.6 percent, the biggest gain in more than four years. The savings rate meanwhile reached its highest level since September at 5.5 percent.
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