Inflation in the US remains subdued
Inflation in the US, measured by the Personal Consumption Expenditure Price Index (PCE), remained subdued in May 2020. On an annual basis the index grew by 0.55% y/y, the same rate as in April. On a monthly basis, however, the indicator posted a positive change, growing by the modest 0.1% m/m. By contrast, in March and April the monthly inflation was negative.
The PCE Index, together with the Consumer Price Index (CPI) are important indicators for inflation in the US. PCE is an index, which is broader than the CPI, is preferred by the Federal Reserve when deciding on interest rates and creating economic projections. The COVID-19 crisis prompted Fed to cut the policy rate twice, with the second cut being an emergency one. Currently the fed funds rate stays in the range 0 – 0.25%.