Underlying US inflation rose in May by less than forecast for the fourth month in a row, suggesting companies are finding ways to limit how much of higher costs from tariffs they pass through to customers.
The consumer price index, excluding the often volatile food and energy categories, increased 0.1% from April, according to Bureau of Labor Statistics data out Wednesday. From a year ago, it rose 2.8%.
The report showed goods prices, excluding food and energy commodities, were unchanged, suggesting higher costs from tariffs are yet to be passed on to consumers. New and used-car prices both declined, as did apparel.
Meanwhile, services prices minus energy rose 0.2%, a deceleration from the prior month.
Treasuries rallied, the dollar declined and S&P 500 futures advanced after the report. Interest-rate swaps showed traders see a 75% probability that the Federal Reserve will cut borrowing costs by September.
The string of below-forecast inflation readings add to evidence that consumers have yet to feel the pinch of President Donald Trump’s tariffs — perhaps because the most punitive levies have temporarily been on pause, or thanks to companies so far absorbing the extra costs.
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However, if higher tariffs set in, shielding consumers from those costs will become more difficult, which is partly why economists expect firms to raise prices more meaningfully in the coming months.
