A key inflation gauge cooled in May, as the Federal Reserve welcomed the news

The Federal Reserve’s preferred inflation measure cooled in May, a mildly encouraging message that could give policymakers hope that price increases will remain modest — albeit a slow pace of progress.

Although overall inflation has eased in recent months, central bank officials are closely monitoring the “core” level of the personal consumption expenditure index, which cuts out grocery and gas costs, which they think provides a better signal of how price increases may be shaped. In the coming months and years. Caught up in the action A higher level and is descending steadily.

In May it is moderate – but not severe. Excluding food and fuel, prices rose 4.6 percent from a year earlier. That would have been in line with the previous month, compared with a forecast for a 4.7 percent increase.

Core inflation from December 2022 is between 4.6 and 4.7 percent, below its peak of 5.4 percent last year, but still above the central bank’s 2 percent inflation target. Its persistence worries policymakers, who have raised interest rates for more than a year in an effort to curb rapid inflation.

Progress in fighting overall inflation has been swift and encouraging. The personal consumption expenditure index, which includes food and gas, rose 3.8 percent in the year to May, according to economists’ forecasts — below 4 percent for the first time since April 2021. That move peaked at 7 percent Last summer.

And moderate overall inflation is putting some pressure on consumers: cheaper gas tanks and less rapid price increases in the grocery aisle are helping paychecks go further. But for central bank officials, signs that inflation is stubbornly surfacing is a cause for concern. Officials believe that key price hikes should be scaled back to ensure the economy’s future is one of modest and sustained price hikes.

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To do that, central bank policymakers have been raising interest rates. Getting a home loan or expanding a business controls the pace of the economy. By slowing growth and cooling demand, the moves are meant to make it harder for corporations to raise their prices without losing customers.

Policymakers avoided a rate hike at their June meeting after 10 straight moves, but have signaled they expect to raise rates above the current standard of 5 percent — perhaps to 5.5 percent by the end of the year. Investors are still betting on just one move this year, but they increasingly see two rate moves as a possibility.

Federal Reserve Chairman Jerome H. Powell, at an event in Madrid this week, stressed that it was uncertain how much higher rates might move this year.

“We have all seen inflation continue to be stronger than expected,” Mr. Powell said. “At some point that may change. I think we have to be willing to follow the data and be a little more patient as we let this unfold.

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