The US core inflation rose 0.2% over the month in May while rising 2.2% over the year.
Investors see the Fed as on track to raise interest rates at its two-day meeting that starts later on Tuesday in Washington, while policy makers will issue updated forecasts showing whether they expect one or two hikes in the second half.
The inflation is back in the United States, with the headline Consumer Price Index (CPI) rising 2.8% over the year in May, approaching 3% level.
The past inflation is rising, but the question is how sustainable and how persistent the inflation in the United States is as transport, tobacco, and housing items were the main upside contributors to the United States inflation in May. At the same time, several Fed officials have indicated that a modest overshoot of the inflation goal wouldn't necessarily warrant faster interest-rate hikes, after years of below-target price gains.
"The slow but steady upward pressure on inflation could tilt a majority of policymakers to lift their suggested interest rate forecast, possibly penciling in two additional moves in the second half of the year after nearly certainly raising rates tomorrow", said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. U.S. Treasury yields were trading lower while U.S. stock index futures were slightly higher. Commerce Department figures released 31 May showed the Fed's preferred gauge of core prices was up 1.8% in April from a year earlier.
A survey by the NFIB on Tuesday showed the share of small businesses reporting raising prices hitting it highest level since 2008 in May.
Seasonally adjusted gasoline prices rose 1.7 percent in May from the previous month, after a 3 percent gain in April. Owners-equivalent rent, one of the categories created to track rental prices, advanced 0.2 percent.
Following a 0.3% increase in April, the US food index stayed constant in May, owing in part to a 0.7% decline in meats, poultry, fish, and eggs, as well as a 0.3% fall in fruits and vegetables.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent in May after a similar gain in April.
Compared to April, however, the index rose only 0.2 percent, undershooting analyst expectations.
Americans are also paying more for housing: Shelter costs have risen 3.5 per cent in the past year. Prices for new motor vehicles rose 0.3 percent after sliding 0.5 percent in April.
But prices for used cars and trucks fell 0.9 percent after tumbling 1.6 percent in April. The preferred core index was up 1.8 percent from the prior year.