Core inflation in the US still troubles

There's good news and bad. The good is that US inflation in May officially came in at an annualized 4%. That prompted some jubilation among superficial mass media. Even the normally sober BBC succumbed to the headline "US inflation at lowest since 2021..." Buried in the story was the bad news - core inflation is still more than twice the Federal Reserve's 'target' of 2%. In fact core inflation (which strips out energy and food) is proving unusually stubborn, rising by 0.4% (the same rise seen in April) putting core inflation at 5.3%. The 'shelter' index in May went up by an annualized 0.6% and is now 8% higher than it was this time last year. Accommodation prices in some parts of the US have started to level of, after dropping recently, and are even increasing.

This Dollar slipped a little on the inflation news but markets overall were more confused than jubilant; this inflation result poses a problem for the US Federal Reserve. Will the Fed push interest rates up (again) on the basis that the inflation beast clearly still has some wind? Or might it decide that the current federal funds rate, now 5%-5.25% is enough? American consumers are struggling with very high rates on a 30-year fixed-rate mortgage, hovering at almost 7%. Against that the average rate for a savings account is a paltry 0.25%, with some online banks offering almost 5%. The Federal Reserve is quite likely to put up interest rates twice more this year, at 0.25% each time. The pain isn't over yet.