One of the most important data points in the CPI report is “supercore” inflation, or, more technically, the change in the price of core services excluding housing. This measure is closely watched by the Federal Reserve because it can indicate the extent to which wage pressures are influencing consumer prices for these labor-intensive services, which make up a large portion of the economy. It’s also important because, with other types of inflation (namely housing) running very high, supercore will need to come down meaningfully for overall inflation to hit the Fed’s 2 percent target.
In May, the supercore measure rose just 0.05 percent from [April’s], which was the slowest monthly rate of increase in nearly two years. This is noteworthy because it is the second consecutive month where we’ve seen a meaningful deceleration in supercore inflation after it had been re-accelerating since August of last year. That acceleration has been a key reason we have not gotten the interest rate cuts many expected [as we were] heading into 2024, so the latest data is a step in the right direction.
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