US inflation dropped to 3.3% in May

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US inflation fell to 3.3% in May, a boost for Joe Biden as Federal Reserve officials prepare to outline plans to cut interest rates this year.

The Bureau of Labor Statistics’ figure for annual consumer price growth was slightly lower than economists’ expectations that inflationary will remain at 3.4%.

Core CPI, which strips out changes in food and energy prices, came in at 3.4%, below expectations for a slight decline to 3.5%.

Treasury yields fell and stock futures rose after the release, as investors bet on more. interest rate cuts this year.

After Wednesday’s data, futures traders had an 84% chance of a rate cut. FedSeptember meeting before the November meeting presidential election. That compares with a 60% chance previously.

According to LSEG data, traders have now fully priced in two price cuts this year. Previously it was between one and two.

Biden has touted a strong labor market and falling inflation as he seeks to convince voters of his economic performance ahead of the election.

Last weeks FT-Michigan Ross Poll of American voters shows that former president Donald Trump’s lead over Biden in terms of reliability in managing the economy decreased from 11% to 4% between February and June.

The Fed is expected to leave interest rates unchanged at a 23-year high of 5.25 to 5.5%, in an announcement later Wednesday.

The central bank will also publish its forecast, or “dot plot,” of how many times it plans to cut borrowing costs this year.

Blerina Uruci, chief US economist at T Rowe Price, said her “baseline scenario” is for the Fed to make two-quarter rate cuts this year.

While the Fed’s preferred measure of inflation is the personal consumption expenditure figure, CPI data still has an impact on the central bank’s approach to cutting interest rates.

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