US consumer prices barely rose in May and the annual increase in inflation was the smallest in more than two years, though underlying price pressures remained strong, supporting the view that the Federal Reserve would keep interest rates unchanged on Wednesday while adopting a hawkish posture.The smaller-than-expected rise in the consumer price index (CPI), reported by the US Department of Labor on Tuesday, reflected decreases in the costs of energy products and services, including petrol and electricity. But rents remained sticky and the prices of used cars and trucks rose further. The report was published as Fed officials prepared to gather for a two-day policy meeting.“It would likely have taken a meaningful upside inflation surprise to convince the Fed to hike in June,” said Seema Shah, chief global strategist at Principal Asset Management. “Yet, with annual core inflation actually rising further in May and coming hot off the heels from the very strong jobs report, the July Fed meeting is very much live.”
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