MercoPress. South Atlantic News Agency

US core inflation drops to 1.9%, lowest in three years

United States core inflation fell below 2% for the first time in three years after a modest increase in prices last month, according to new government figures.

A key index of consumer prices, excluding volatile food and energy, climbed only 0.1% in May, which brought the rate for 12 months to 1.9%. High petrol prices drove the headline rate up 0.5%. The report from the Commerce Department on Friday also showed consumer spending and income lower than expected in May. Personal income increased 0.4% and consumption spending increased 0.5% for the second consecutive month. The slowdown in core inflation will be welcomed by the Federal Reserve, which on Thursday left interest rates unchanged at 5.25% and warned about the risks of future inflation. In its statement at its June policy meeting, which kept rates at 5.25 per cent, the Fed dropped its description of core inflation as "somewhat elevated" and acknowledged that "readings on core inflation have improved modestly in recent months". But it warned that "a sustained moderation in inflation pressures has yet to be convincingly demonstrated."