Key takeaways

  • Both headline and core inflation cooled from the previous month, giving more leeway for the Federal Reserve to cut interest rates this year.
  • The prices that fell the most were gasoline, new vehicles, auto insurance and airfare.
  • Some prices remain troublingly elevated, however, including the costs of medical care and housing.


Megan Werner

Digital Content Writer & Editor, J.P. Morgan Wealth Management

The Consumer Price Index (CPI) remained unchanged in May on a seasonally-adjusted basis, following a 0.3% increase in April, as reported by the U.S. Bureau of Labor Statistics.1 The core reading, which excludes food and energy, came in at 3.4% year over year, down from last month’s 3.6%. The softness seen in May’s CPI report follows a string of hotter-than-anticipated prints and seems to indicate the disinflation process is still intact – a welcome sign for the Federal Reserve.

Inflation drivers in May 2024

May’s downshift in consumer prices was particularly helped by marked cooling in the services component of the index. That said, stubborn shelter prices continued on an upward trend, rising by 0.4% for the fourth consecutive month. This persistent increase in shelter costs underscores ongoing pressure in the housing market.

Rent and owners’ rent equivalent both rose by 0.4% month-over-month (MoM) in May.2 Since these categories make up more than a third of the index's relative importance weighting, moderate increases in shelter will keep the overall index elevated, even with drops in the volatile food and energy indexes. But as economists at the Bureau of Labor Statistics (BLS) note, shelter is both difficult to measure and a lagging indicator.3 While economists have been expecting housing inflation to cool, it has been surprisingly stubborn, even as the prices of other goods have fallen.

Under the hood, some other components of the index rose faster than anticipated. Notably, medical care prices rose by 0.5% in May after a 0.4% increase in April, with prescription drugs rising by 2.1%. Hospital services also rose by a noteworthy 0.5%. Meanwhile, the prices of used cars and trucks, which had been cooling at the end of 2023, saw increases. Food prices, an ongoing pain point for consumers, increased modestly at 0.1% MoM. Although pandemic-era price increases due to shortages appear to be in the rearview mirror, consumers have continued to show willingness to spend.

CPI headline inflation rate and the core rate: What fell in May

Energy prices fell by 2% in May, primarily driven by a 3.6% decrease in the gasoline index. This decline in energy costs provided some relief to not only the headline CPI reading but also to consumers. Despite bouts of geopolitically-fueled volatility, falling oil and gas prices have played a part in easing overall inflation throughout the last year.

Core CPI (i.e., all items ex food and energy prices) not only fell year-over-year but also softened on a MoM basis, coming in at 0.2% in May – down from a 0.3% increase in April. The core measure is particularly important to policymakers as it excludes more volatile components giving them a “better look” at the data. To boot, this month’s print seems to signal that the uptick in inflation at the beginning of the year was a speed bump, not a derailment of disinflationary trends.

“While inflationary pressures are still in play, today’s data fit with our core view that we should see continued disinflation throughout the remainder of the year,” said Global Investment Strategist, Sarah Stillpass, adding that, “If the trend continues, we would expect the Fed to deliver one rate cut by year end, likely in December.”

Several indexes that make up the core inflation reading also decreased in May. One such index was airline fares, which fell by 3.6%, following a 0.8% decrease in April. “We saw exceptional weakness in a variety of transportation sector components, like airfare and auto insurance,” Stillpass said, noting that, “If we look at the data and strip out the transportation sector, prices are a bit firmer, but nonetheless still decreasing.” The new vehicles index dropped by 0.5%, while the communication index – which measures telephone and internet services – decreased by 0.3%. Additionally, the recreation index declined by 0.2%. Indexes for apparel, household furnishings and operations, motor vehicle insurance and personal care all experienced declines.

Elevated inflation persists in some corners of the economy

While inflation remains elevated, May’s CPI report was certainly a welcome one ahead of the Fed’s May meeting. Our strategists expect the disinflation trend to continue, thereby allowing the Fed to deliver a rate cut by the end of this year.



Bureau of Labor Statistics (BLS), “Consumer Price Index Summary.” (June 2024)


BLS, “Table 1. Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, by expenditure category.” (June 2024)


BLS, “Measuring Price Change in the CPI: Rent and Rental Equivalence.” (May 2023)

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