In a rare moment of tranquility, U.S. consumer prices decided to take a well-deserved nap in May. This surprising siesta was largely due to the decreasing cost of gasoline and a few other bargain-bin goodies, leaving experts scratching their heads and the Federal Reserve fidgeting in their armchairs.

According to a Reuters report on June 12, 2024, and a USA Today article on the same date, the consumer price index (CPI) remained unchanged in May, following a 0.3% increase in April. This development marks a continuation of a downward trend in the CPI that began in February and March. Economists, who had confidently forecasted a modest 0.1% rise, were left wondering if their crystal balls needed a software update.

While the unchanged CPI might suggest that inflation is finally hitting the snooze button, the reality is that it still runs too hot for the Federal Reserve's liking. Inflation remains above the Fed’s 2% target, making an immediate interest rate cut about as likely as finding a parking spot in Manhattan (Reuters, USA Today).

In the 12 months through May, the CPI saw a modest gain of 3.3%, down from a 3.4% increase in April (Reuters). However, this does not mean that all components of the CPI are behaving so demurely. Excluding the ever-volatile food and energy sectors, the core CPI edged up by 0.2% in May (USA Today). Over the past 12 months, the core CPI experienced a 3.4% rise—its smallest year-on-year gain since April 2021, but still enough to keep the Fed on high alert (Reuters).

Despite CPI's leisurely pace in May, inflation's dream of a peaceful layover at 2% is still just that—a dream. The Federal Reserve has been trying to lull inflation back to sleep by raising the policy rate by a whopping 525 basis points since March 2022 (USA Today). But as far as cutting rates goes, the Fed appears to be taking the "wait-and-see" approach, peeking through the curtains now and then to check if inflation is finally dozing off (Reuters).

Financial markets, ever the optimistic bunch, are already setting their watches for the Fed’s anticipated easing cycle. Analysts expect a possible rate cut to come in December, provided inflation doesn't wake up on the wrong side of the bed and start acting out again (USA Today). The Federal Reserve, however, might be more likely to start considering cuts by September, playing it safe in this house of cards we've come to call the U.S. economy.

The unchanged CPI might seem like a gift to consumers weary of rising prices, but the reality is more nuanced. According to the data, the year-to-year CPI rise in May hints that the economy is still far from the Fed's comfort zone. The quest for price stability is more like an elusive dream than a tangible reality at this point (Reuters, USA Today).

In the meantime, consumers can bask in the transient glory of cheaper gasoline while the Federal Reserve’s policymakers ponder their next caffeine fix. Will they cut rates in September, or will they prefer to wait until the December holiday rush? Only time—and a lot more data—will tell.

For now, we can all enjoy the quiet while it lasts, reminiscing about the days when price stability was more than just a charming bedtime story.