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Consumer prices fell more than expected in May

Akin Oyedele
Target groceries grocery store

(AP Photo/Matt Rourke)
US consumer prices fell more than expected in May, according to the Department of Labor's monthly consumer price index (CPI). 

Cheaper gas prices dragged the index down. Shelter, clothes, vehicles, and medical-care services also fell. 

The gauge of consumer-price changes dropped by 0.1%, missing the forecast for a flat reading, and rose by 1.9% year-on-year (2.2% expected.)

Excluding volatile food and energy costs, so-called core CPI  rose by 0.1% from April, and 1.7% from May 2016, both less than expected. 

This data comes ahead of the end of the Fed's two-day meeting on Wednesday, after which it's expected to announce a hike in interest rates. Interest-rate doves, who would rather delay further rate increases, would note the softness in CPI and the fact that the Fed's preferred gauge of inflation — personal consumption expenditures — has not reached its 2% target. 

Fed officials, however, are likely to view soft inflation as being transitory and point to the labor market's gains. 

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