A closely watched inflation report on Friday showed that us
prices were unchanged in May from the prior month as
a modest increase in the cost of services was offset
by the biggest drop in goods prices in six months
. The report from the Commerce Department known as the
personal consumption expenditures price index is the preferred inflation gauge
of the Federal Reserve. The flat monthly reading raised
investors hopes that the central bank might start cutting interest
rates as soon as September. Despite FED, officials
having already indicated that December is more likely. The
report also showed the annual inflation rate ticking down to
2.6% which is still above the fed's 2% target and
the core PCE which excludes volatile food and energy prices
recorded its smallest gain since November. That helped put
the annual core inflation rate at 2.6%. Its smallest
increase since March 2021. Consumer spending also rose marginally
last month raising optimism that the FED could engineer a
soft landing for the economy in which inflation falls without
triggering a recession or a sharp rise in unemployment.