The inflation rate cooled in May to its lowest annual rate in about two years, the Labor Department reported Tuesday.

The consumer price index, which measures changes in a multitude of goods and services, increased just 0.1% for the month, bringing the annual level down to 4%. That 12-month increase was the smallest since March 2021, when inflation was just beginning to rise to what would become the highest in 41 years.

Excluding volatile food and energy prices, the picture wasn’t as optimistic.

So-called core inflation rose 0.4% on the month and was still up 5.3% from a year ago, indicating that while price pressures have eased somewhat, consumers are still under fire.

All of those numbers were exactly in line with the Dow Jones consensus estimates.

A 3.6% slide in energy prices helped keep the CPI gain in check for the month. Food prices rose just 0.2%.

However, a 0.6% increase in shelter prices was the biggest contributor to the increase for the all-items, or headline, CPI reading. Housing-related costs make up about one-third of the index’s weighting.

Elsewhere, used vehicle prices increased 4.4%, the same as in April, while transportation services were up 0.8%.

Markets showed little reaction to the release, despite its expected prominence in the decision the Federal Reserve will make at this week’s meeting regarding interest rates. Stock market futures were slightly positive, though Treasury yields fell sharply.

Pricing did shift notably in the fed funds market, with traders now pricing in a nearly 100% chance that the Fed will not raise benchmark rates when its meeting concludes Wednesday.

The tame CPI reading was good news for workers. Average hourly earnings adjusted for inflation rose 0.3% on the month, the Bureau of Labor Statistics said in a separate release. On an annual basis, real earnings are up 0.2% after running negative for much of the inflation surge that began about two years ago.

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