Wall Street, however, greeted the latest report with relief, because it did not paint an even worse picture on inflation. Much of the rise in nonenergy costs was blamed on a statistical quirk in how the government measures shelter costs.
Some analysts said they believed the Fed will be able to wrap up its two-year-long credit-tightening campaign with just one or at most two more rate increases. ``The Fed will tighten at the end the month, but that may be it for awhile," said Mark Zandi, chief economist at Moody's Economy.com. ``Economic growth is slowing and the prospects are that it will slow even more in the months ahead."
That view was bolstered by a separate Fed survey of nationwide business conditions which showed activity was slowing in many parts of the country with home sales and manufacturing both showing signs of cooling. The Fed is hoping for a moderate slowdown as a way to take pressure off prices.
That survey's summary for the Boston area said: ``Manufacturers and software and information technology service firms indicate that revenues are up solidly from a year ago, with many manufacturers reporting double-digit gains." Labor markets tightened, ``with various technical and professional positions reportedly difficult to fill."
The 0.4 percent May rise in inflation followed an even bigger 0.6 percent April increase with both months driven by soaring energy prices.
