US Inflation Broadly Cools in Encouraging Sign for Fed Officials

A key measure of underlying US inflation stepped down for a second month in May, a pleasant surprise for Federal Reserve officials looking for signs that they can start to lower interest rates.

The so-called core consumer price index — which excludes food and energy costs — climbed 0.2% from April, Bureau of Labor Statistics figures showed. The year-over-year measure rose 3.4%, cooling to the slowest pace in more than three years, according to data out Wednesday.

The figures, taken with the deceleration in the core CPI in April, may represent the early stages of inflation resuming a downward trend. But policymakers have stressed that they’d need to see several months of price pressures receding before they consider lowering interest rates, especially with the latest jobs report reigniting the debate over how restrictive policy actually is.

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Economists see the core gauge as a better indicator of underlying inflation than the overall CPI. That measure was flat from the prior month — the tamest in almost two years, dragged down by cheaper gasoline — and 3.3% from a year ago.