WASHINGTON, United States (AP) — Consumer prices in the United States cooled last month, rising just 0.1 per cent from April to May and extending the past year’s steady easing of inflation. At the same time, some measures of underlying price pressures remained high.

Measured year over year, inflation slowed to just 4 per cent in May — the lowest 12-month figure in over two years and well below April’s 4.9 per cent annual rise. The pullback was driven by tumbling gas prices, a much smaller rise in grocery prices than in previous months and less expensive furniture, air fares and appliances.

Tuesday’s inflation figures arrive just as Federal Reserve officials begin a pivotal two-day meeting, after which they’re expected to leave interest rates alone after imposing 10 straight rate hikes dating back to March 2022. On Wednesday, the central bank will likely announce that it’s skipping a rate hike but may hint that it will resume raising rates as soon as July. Top Fed officials have said they’re leaning toward a so-called “skip” to allow time to assess how their rate hikes have affected inflation and the overall economy.

Still, last month’s drop-off in overall inflation isn’t likely to convince the Fed’s policymakers that they’re close to curbing the high inflation that has gripped the nation for two years. The Fed tends to focus more on “core” prices, which exclude volatile food and energy costs and generally provide a clearer view of inflation.

And core prices remained high last month, rising 0.4 per cent from April to May, the sixth-straight month of increases at that level or higher. Compared with a year ago, core inflation slipped to 5.3 per cent from 5.5 per cent. That is still far above the Fed’s target of 2 per cent.

Last month’s core inflation was fuelled mainly by high apartment rental costs and a second-straight jump in used car prices, which soared 4.4 per cent just from April to May. Those two factors alone drove four-fifths of the monthly increase in core prices, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Yet most analysts expect those costs to slowly ease in the coming months, which could put core inflation on a steady downward path. Wholesale prices of used cars declined last month, for example, which may foretell lower retail used car prices in coming months.

“There’s progress, it’s encouraging,” said Eric Winograd, chief economist at asset manager AllianceBernstein. “I think it’s enough for the Fed to pause tomorrow…But I don’t think it is enough that we can sound the all-clear.”

Gas prices, adjusted for seasonal patterns, fell 5.6 per cent from April to May; they’re down nearly 20 per cent from a year ago. And grocery prices ticked up just 0.1 per cent, a relief to consumers, though they’re still 5.8 per cent higher than they were a year ago.

The stubbornness of underlying inflation reflects a fundamental challenge for the Fed: The economy has steadily defied long-standing forecasts for a recession, dating back more than a year. Instead, businesses have kept hiring at a healthy pace, average paychecks are climbing and workers are freely spending their larger wages.

Though a resilient economy is great for households and businesses, it may also be helping fuel chronically high inflation. Some economists argue that many companies are keeping prices artificially high, more than is needed to cover their own higher costs, to drive profit growth. The nation’s consumers might have to pull back, en masse, before most businesses will reduce prices. In the meantime, steadily robust hiring is allowing Americans, as a whole, to keep spending.

The Fed has raised its benchmark rate by a hefty 5 percentage points over the past 15 months — the fastest pace of rate increases in four decades. Those hikes have led to much higher costs for mortgages, auto loans, credit cards and business borrowing. The Fed’s goal is to slow borrowing and spending, cool the economy and tame inflation — without causing a deep recession. It’s a notoriously difficult task.

There are some signs that the Fed’s efforts are having the desired effect. Inflation is expected to take another big step down in the June figures that will be reported next month. Price growth could slide as low as 3.2 per cent from a year earlier, according to some economists’ estimates. That would be significantly below inflation’s peak of 9.1 per cent in June 2022, the highest level in four decades.

Yet any sharp declines in May and June will in part reflect the fact that prices soared in both those months last year. As those months drop out of the year-over-year inflation calculations, they are replaced with smaller monthly gains. The effect can sharply lower measures of annual inflation.

Still, core prices are expected to stay high in May, driven up by another jump in used car prices and steady increases in rental costs. Used car prices soared 4.4 per cent just from March to April. Economists expect another increase, though not quite as large, from April to May.