US consumer prices rise more than expected, Fed rate cut bets dim

• US consumer prices rose 0.3% in May, exceeding forecasts.
• Core CPI increased 0.3% in May, also above expectations.
• Annual inflation was 3.4% in May, with core annual inflation at 3.6%.
• The Federal Reserve kept interest rates unchanged at 5.25%-5.50%.
• Fed officials now anticipate only one rate cut in 2024, down from previous projections of three.
• The central bank's updated economic projections show inflation is expected to be 2.6% by year-end.

US consumer prices rose more than expected in May, according to data released on Wednesday, further dimming the prospects of an imminent interest rate cut by the Federal Reserve. The Consumer Price Index (CPI) increased by 0.3% last month, following a 0.3% rise in April. Economists had forecast a 0.1% increase. On an annual basis, inflation stood at 3.4%, compared to 3.3% in April.

Core CPI, which excludes volatile food and energy prices, also climbed 0.3% in May, matching the previous month's gain and exceeding the 0.2% consensus estimate. Annually, core inflation was 3.6%, down from 3.6% in April.

The inflation figures were released just hours after the Federal Reserve concluded its June policy meeting, where it kept its benchmark interest rate unchanged at 5.25%-5.50%. Fed officials, in their updated economic projections, now anticipate only one rate cut in 2024, a significant reduction from the three cuts projected in March. They forecast inflation to be 2.6% by year-end, up from their previous estimate of 2.4%.

Fed Chair Jerome Powell acknowledged that while inflation has eased over the past year, it remains too high. He emphasized that the central bank needs greater confidence that inflation is moving sustainably toward its 2% target before considering rate reductions.