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May Inflation Slows as Shelter Costs Continue to Cool

Kirk Evans  3-MINUTE READ  June 13, 2023


The Consumer Price Index (CPI) data for May has revealed a notable slowdown in inflation. According to the Bureau of Labor Statistics (BLS), the CPI rose by 4.0% year over year, a decrease from the 4.9% recorded in April.

This marks the smallest 12-month increase since March 2021 and represents the 11th consecutive month of inflation declines. Despite the Federal Reserve's target of 2.0% annual inflation, the policymakers' approach remains uncertain due to the possibility of a recession and further rate hikes.

Key factors contributing to the annual increase in May were food (6.7%), motor vehicle insurance (17.1%), recreation (4.5%), household furnishings and operations (4.2%), and new vehicles (4.7%). The largest category, shelter, also experienced a significant increase of 8.0% year over year, accounting for 60% of the total increase in the all items less food and energy index.

However, it's important to note that the CPI metric lags behind asking rents, as it measures in-place rent. The peak rent inflation occurred between May 2022 and February 2023 but has since declined and is expected to continue doing so.

In May, lower inflation figures were also influenced by falling energy costs. The energy index recorded a significant decrease for the third consecutive month, with a year-over-year drop of 11.7%, including a 19.7% decrease in the gasoline index.

Industry experts believe that despite inflation remaining above the Fed's target, the Federal Open Market Committee (FOMC) will likely choose to pause rate hikes at their upcoming meeting. However, economists caution that a rebound in the housing market could complicate the Fed's decision-making process.

Stay tuned for further updates on the economic landscape as the Federal Reserve convenes to discuss the federal funds rate on Wednesday.


  • Bureau of Labor Statistics (BLS)
  • National Association of Realtors
  • Bright MLS
  • Goldman Sachs Economic Research Report

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