Inflation Slows, Fed Actions Pay Off: CE Analysis

Consumer prices rose 0.1 percent in May (up 4 percent this past year), according new inflation data released today by the Labor Department. Inflation is now at its slowest annual pace since March 2021. Good news, explains CEI Senior Economist Ryan Young:

“Inflation isn’t conquered yet, but today’s CPI news bodes well. Tomorrow the Federal Reserve will make its next interest rate decision and will likely keep rates the same after more than a year of continuous increases.

“The Fed has already done the heavy lifting of getting its runaway money supply growth under control. One reason inflation has stayed high is because, after the COVID stimulus experience, neither Congress nor the president have credibility when it comes to spending restraint. Markets more or less expect heavy stimulus spending to happen at the first sign of economic trouble, and that can cause inflation.

“A healthy labor market, a still-growing economy, and a lack of big spending bills on the horizon are all helping to convince people that Washington might show some discipline for once. Now that is starting to show in inflation numbers. That’s good news, but it could also change on a dime.”