Inflation Eases Off but Fed May Not; Prices Fell and Wages Rose in May; Experts See No Early End to Rate Hikes
Consumer prices fell in May, the first decline in 10 months, as energy costs eased from highs hit in early April, the government reported yesterday.</br></br>The figures suggest that after a year of Federal Reserve interest rate increases, the U.S. economy is in pretty good shape, growing at a decent clip with low inflation, unemployment and interest rates.</br></br>But the Fed is far from declaring victory, or finishing its work of raising its benchmark short-term rate -- contrary to the hopes and predictions of many traders and analysts in the financial markets.</br></br>Federal Reserve Chairman Alan Greenspan indicated to Congress's Joint Economic Committee last week that the central bank remains concerned about the potential for future inflation. Interest rates remain too low. Labor costs are rising. Businesses are finding it easier to raise prices. And Fed officials are intensely studying whether the red-hot housing market might contribute to higher overall consumer prices.</br></br>To keep the lid on inflation, he suggested, the Fed probably will keep steadily raising short-term interest rates in the months to come.