The Consumer Price Index - which tracks costs for household goods and services - rose a token 0.1 percent compared to April, matching analyst forecasts, the Labor Department reported. A majority of investors expect a rate cut at the Fed's July meeting, according to the CME Group.
In its place is likely to be something more along the lines of what Powell said last week - namely, that the Fed is "closely monitoring" the economy and is ready to "act as appropriate to sustain the expansion". Data for May will be released later this month.
"So the market is waiting for next week's Fed meeting as a chance to see by how much and for how long it is ready to ease policy".
The energy index slid 1.24%, the most among the 11 S&P sectors, as crude prices fell more than 2%.
US inflation rose by 0.1% in May, down from 0.3% in April but in line with the market consensus, Bureau of Labor Statistics data shows.
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Compared to May of previous year, prices are up 1.8 percent, slowing from the two percent increase in April. But costs for auto insurance, used motor vehicles and recreation fell.
With the dollar being on the backfoot since the latest eruption in trade tensions, the U.S. currency is looking slightly oversold and could be prone to an upside correction if the data come in at or above estimates. "While core CPI inflation is still at 2.0%, the Fed's preferred measure has typically been a few ticks lower, and today's report does not bode well for an uptick in inflation there". Food prices rebounded 0.3% in May after dipping 0.1% in the prior month.
USA housing costs have been rising steadily as rents have increased 3.7% in the latest 12 months, while the equivalent costs for homeowners in up 3.3%, according to the data. Electricity prices were down 0.8%.
Core inflation, which is seen as a truer measure of domestically generated inflation pressures because it excludes changes in commoditised food and energy prices, surprised on the downside in May. They had declined for two months in a row after the government introduced a new method and data to calculate apparel prices.
Prices for used motor vehicles and trucks tumbled 1.4%, marking the fourth straight monthly drop. The solid increase in health care costs at both the consumer and production levels last month suggests a pickup in the core PCE price index in May. There were also decreases in the cost of recreation. Weighing even heavier are signs of lacklustre expansions at home and overseas, along with President Donald Trump's tariffs on Chinese goods.