Inflation eases in May, but don’t expect relief on interest rates anytime soon

Consumers in the West Coast and across the nation received a bit of relief last month as inflation eased after running hotter than expected earlier in the year.

The government said Wednesday that U.S. consumer prices overall rose 3.3% in May from the same month a year earlier.

The new report will be welcomed by the Federal Reserve as it meets later Wednesday to consider interest rate policies.

The Fed has kept interest rates high to fight inflation, even as that has imposed real hardships on millions of Americans, especially in expensive places like California where the cost of housing is beyond the reach of most buyers.

The May inflation numbers, however, won’t be enough for the Fed to begin cutting interest rates Wednesday. Fed officials want to see clear evidence that inflation is coming down toward its 2% target.

“We still need several more months of this, but the fundamentals are encouraging,” said Paul Ashworth, chief North America economist at Capital Economics, a research firm.

Most analysts expect the Fed to make one or two small cuts late in the second half of the year.

The economy has shown some signs of cooling, although job growth remains strong and average wage gains are still running slightly above the rate of inflation.

Wednesday’s report showed that annual inflation also slowed in the Pacific region in May but is running above the nationwide average, at 3.7%, in part because of higher price increases for food, transportation and gas.

Throughout the country, rents and what’s called homeowner’s equivalent rents remain stubbornly high. Housing inflation in May was 4.6% for the U.S. and 4.5% for the Pacific states.

Prices of some goods, however, have been falling. That includes new and used cars, which surged in 2021 and 2022 when inflation overall spiked and peaked at 9.1% in June 2022.