12:30 PM EDT, 06/12/2024 (MT Newswires) -- US consumer inflation unexpectedly stalled in May on a sequential basis while dipping more than forecast at the annual level, government data showed Wednesday, just before the Federal Reserve's monetary policy committee was set to adjourn its June meeting.

The consumer price index was flat last month, easing from a 0.3% increase in April, according to the Bureau of Labor Statistics. Analysts were expecting the pace of monthly inflation to decelerate to 0.1%, according to a Bloomberg-compiled survey. Annually, inflation slowed to 3.3% in May from the prior month's 3.4%, which was the Wall Street consensus.

"The CPI report for May came in a bit better than we dared hope for given the string of disappointing readings to start the year," said BMO Economics Chief US Economist Scott Anderson in a note. "If sustained, it will keep Fed rate-cut expectations that we have penciled in for September and December alive and well."

The Federal Open Market Committee is widely expected to maintain interest rates on Wednesday -- which would mark a seventh consecutive pause -- and again at its July meeting, according to the CME FedWatch Tool. Bets for a September cut jumped to almost 63% from about 47% one day ago, the data showed.

Monthly food price growth edged up to 0.1% from a flat reading in April, while energy prices fell 2% in May after increasing 1.1% in April, the BLS reported. The decline in energy reflected decreases of 3.6% for gasoline and 0.4% for fuel oil. Annually, food prices increased 2.1% and energy rose 3.7%.

Shelter costs inclined 0.4% sequentially for the fourth month in a row in May and more than offset the decline in gasoline, the BLS said. Annually, shelter costs rose 5.4%. US equity markets were rising intraday Wednesday.

Core inflation, which excludes the volatile food and energy components, eased to 0.2% in May from 0.3% in April, the official data showed. Analysts were expecting core inflation to remain unchanged on a monthly basis. At the annual level, core inflation came in at 3.4%, better than the 3.5% average analyst forecast.

"Restrictive monetary policy has more work to do, and the Fed will remain patient and watchful," Anderson said. "However, today's far softer CPI report will go a long way in making the case that it can soon safely ease off the monetary brake pedal without risking another inflation episode."