Annual inflation rate cools to 3.3% but remains well above Federal Reserve's target

Wage increases are slightly outpacing inflation, but will that be enough to lower interest rates?
A car sits next to a sign advertising gasoline prices.
Posted at 10:38 AM, Jun 12, 2024

The U.S. consumer price index, the government’s top measure for inflation, remained unchanged in May, meaning prices for goods and services largely were the same last month as they were in April. For the 12-month period ending in May, the price of goods and services increased by 3.3%, according to government data. The new inflation data was released Wednesday by the government's Bureau of Labor Statistics.

The inflation rate was 3.4% for the 12-month period ending in April and 3.5% for the year ending in March. The consumer price index weighs the costs of goods based on their importance. Items like food, shelter and energy tend to be weighted more heavily.

The good news for consumers is that inflation for food purchased at grocery stores is low. In the 12 months ending in May, food meant to be consumed at home was 1% higher. Just a few years ago, annual food inflation topped 10%. This slowing of food inflation comes as major chains, such as Walgreens and Target, have announced price rollbacks on numerous items.

A McDonald's sign in Wheeling, Illinois.

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Dining out continues to be a more expensive proposition as eating away from the home costs 4% more this year than last, the BLS said. Some fast food chains, however, have said they will begin offering value meals in hopes of attracting inflation-weary customers.

The bad news is that shelter prices continue to rise. Shelter was 5.4% higher in May 2024 than a year earlier.

May marked 13 consecutive months with a consumer price index between 3% and 4%. With inflation failing to drop below 3%, the Federal Reserve has continued to keep interest rates at a five-decade high since late 2023. Higher interest rates are meant to lower inflation.

On Wednesday, the Federal Reserve will announce possible changes to the inflation rate. So far, the federal interest rate has remained steady in 2024.

Wages are outpacing inflation. Average weekly earnings have increased by 3.8% in the last year, the Bureau of Labor Statistics said.