The latest confirmation of the absence of inflation should comfort markets hoping the Federal Reserve will cut interest rates in the coming months to boost the economy, especially amid President Donald Trump's multi-front trade wars.
The CPI numbers show "there are limited inflation pressures in the USA economy right now", said Leslie Preston, senior economist at Toronto-Dominion Bank.
Below-forecast inflation follows signs of slower economic growth in the USA that would only bolster investor expectations for Fed rate cuts this year.
Fed Chairman Jerome Powell said last week that the USA central bank was closely monitoring the implications of the trade tensions on the economy and would "act as appropriate to sustain the expansion".
Traders in futures markets are giving odds of about 20% that the Fed will cut rates at its meeting next week - and a 70% chance of at least one cut by the central bank's July 30-31 meeting, WSJ reported.
The consumer price index edged up 0.1 per cent last month as a rebound in the cost of food was offset by cheaper gasoline, the government said. The CPI gained 0.3 per cent in April. Non-alcoholic beverages increased 1.2% last month. That led the producer price index for final demand to edge up 0.1 percent in May after gaining 0.2 percent in April. That core price gauge - linked to spending and excluding food and energy - firmed in April for the first time this year, though remained below the Fed's two-per-cent target. But costs for auto insurance, used motor vehicles and recreation fell.
Although eurozone countries share a currency, and thus don't have a national exchange rate, the U.S. Treasury has placed a number of European countries on a watch list for practices the U.S. says are close to currency manipulation, giving their economies an unfair advantage.
EUR/NZD rallied to its highest levels since late October in early trading on Wednesday.
The report showed used-car prices dropped 1.4% from the prior month while new vehicle prices increased 0.1%; The index for motor insurance dropped the most since 2007.Shelter costs rose 0.2%, as owners-equivalent rent, one of the categories that tracks rental prices, increased 0.3%. Those healthcare costs feed into the core PCE price index.
Gasoline prices fell 0.5 per cent in May after rising 5.7 per cent in April. Food prices rebounded 0.3 per cent in May after dipping 0.1 per cent in the prior month. Food consumed at home increased 0.3%.
U.S. housing costs have been rising steadily as rents have increased 3.7% in the latest 12 months, while the equivalent costs for homeowners in up 3.3%, according to the data.
The Labor Department says the increase last month in its producer price index, which measures inflation pressures before they reach consumers, was half April's 0.2% increase.