Inflation remained minimal last month in the United States, leaving the rate-setting Federal Reserve flexibility when it issues monetary policy decisions on Wednesday in Washington.
Consumer prices rose a seasonally adjusted 0.1 per cent in May, following declines of 0.4 per cent in April and 0.2 per cent in March.
The inflation rate for the 12 months through May was 1.4 per cent, the US Bureau of Labour Statistics said on Tuesday. Prices have been stable or declined in five of the last seven months.
So-called core inflation, which excludes volatile food and energy prices, was 0.2 per cent last month and 1.7 per cent for the last 12 months.
Uncertainty about the Fed’s plans has left world bond and equities markets yo-yoing in recent weeks.
The Fed is scheduled to end its two-day regular meeting with a monetary policy statement at 2 pm (1800 GMT) on Wednesday, followed by a closely watched press conference by bank chief Ben Bernanke.
The central bank has kept its key interest rate near zero since December 2008.
The unprecedent slack money supply has since been supplemented by Fed buying of US government bonds – so-called quantitative easing – in effect, printing money and shovelling it into the private sector in hopes of spurring investment.
The latest round of bond buying was launched in September at a pace of $85 billion a month, or about $1 trillion a year in the $16 trillion US economy.
The Fed’s in May said it was “prepared to increase or reduce the pace” of its purchases of government bonds “to maintain appropriate policy accommodation as the outlook for the labour market or inflation changes.” Previous Fed policy language had not directly stated a willingness to raise its pace of bond purchases above the current 85 billion dollars a month. The unconventional monetary policy is intended to depress long-term interest rates.
US unemployment edged up to a seasonally adjusted 7.6 per cent in May from April’s four-year low of 7.5 per cent.
Government surveys showed modestly expanding payrolls, while discouraged workers resuming efforts to find jobs. During the slow economic recovery since the 2007-09 US recession, many people unable to find jobs quit looking, removing them from the official unemployment rate.
Economic expansion picked in the January-March quarter to an annualized 2.4 per cent, according to the Commerce Department, after fourth-quarter growth stalled out at just 0.4 per cent.
“A premature tightening of monetary policy could lead interest rates to rise temporarily, but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Fed chief Ben Bernanke told Congress last month.