Inflation may have cooled in May, but Federal Reserve is seeking sustained improvement

WASHINGTON (AP) — Less-expensive gas likely slowed U.S. consumer inflation in May. But when the government reports the latest monthly price data Wednesday, Wall Street traders and Federal Reserve officials will be paying particularly close attention to an index that excludes volatile food and energy costs.

These so-called “core” prices are expected to have risen 0.3% from April to May, the same as in the previous month, according to a survey of economists by data provider FactSet. Compared with a year earlier, core inflation is thought to have dipped from 3.6% to 3.5%.

Even as overall inflation moderates, such necessities as groceries, rent and health care are much pricier than they were three years ago — a continuing source of public discontent and a political threat to President Joe Biden’s re-election bid. Most other measures suggest that the economy is healthy: Unemployment remains low, hiring is robust and consumers are traveling, eating out and spending on entertainment. Yet polls show that the cumulative price increases are weighing on Biden’s popularity.

The Fed is closely monitoring each month’s inflation report for signs that it’s succeeding in its fight against rising prices. A rise in core consumer prices of 0.3% is too high, over time, to be consistent with the central bank’s 2% annual inflation target and could be seen as a disappointment. Still, the Fed’s officials prefer a separate inflation measure, which typically comes in slightly lower than Wednesday’s consumer price index.

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