After reporting decreases in consumer prices in each of the two previous months, the Labor Department released a report on Tuesday showing a modest increase in prices in the month of May.
The Labor Department said its consumer price index inched up by 0.1 percent in May after falling by 0.4 percent in April and dipping by 0.2 percent in March. Economists had been expecting the index to edge up by 0.2 percent.
While the monthly increase was relatively modest, the annual rate of consumer price growth accelerated to 1.4 percent in May from 1.1 percent in April.
"Nevertheless, inflation is still well below the Fed's 2% target, allowing the central bank plenty of scope to phase out its quantitative easing very gradually," said Paul Ashworth, Chief U.S. Economist at Capital Economics.
The Labor Department said the monthly increase in prices was primarily due to an increase by the shelter index, which rose by 0.3 percent in May after climbing by 0.2 percent for four consecutive months.
The report said energy prices increased by just 0.4 percent in May after tumbling by 4.3 percent in April. Increases by the electricity and natural gas indexes accounted for the growth, while the gasoline index was flat compared to the previous month.
Meanwhile, food prices edged down by 0.1 percent in May after rising by 0.2 percent in April. The index for food at home fell by 0.3 percent, its steepest decline since July of 2009.
The core consumer price index, which excludes food and energy costs, rose by 0.2 percent in May after rising by 0.1 percent in each of the two previous months. The modest increase matched expectations.
Compared to the same month a year ago, core prices rose by 1.7 percent in May, unchanged from the annual growth seen in April.
"The low level of headline inflation largely reflects the drop back in commodity prices over the past 12 months, with even the low core rate partly explained by the indirect impact of those lower commodity prices," Ashworth said.
"Under those circumstances, we wouldn't expect the Fed to put too much weight on inflation being below its target. Once commodity prices level out, the downward pressure on consumer goods prices will begin to ease," he added. "In other words, this won't prevent the Fed from beginning to reduce its monthly asset purchases, probably beginning in September."
Last Friday, the Labor Department released a separate report showing that producer prices rose by more than anticipated in the month of May, with the price growth largely due to a notable rebound by energy prices.
The Labor Department said its producer price index rose by 0.5 percent in May following a 0.7 percent decrease in April. Economists had been expecting producer prices to edge up by 0.2 percent.
With the monthly increase, which came after two consecutive monthly decreases, producer prices increased at an annual rate of 1.7 percent in May compared to the 0.6 percent increase in April.
Excluding the jump in energy prices as well as an increase in food prices, the core producer price index inched up by 0.1 percent for the second straight month, matching economist estimates.
Compared to the same month a year ago, the core producer price index rose by 1.7 percent in May, unchanged from the annual rate of growth seen in April.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.