While core inflation remained relatively mild in May using the Fed's preferred gauge, this chart shows how goods prices are no longer helping and have in fact started to make a contribution to inflation, as measured on a 12-month basis. Last year, almost all of the overshoot from the Fed's 2% target came from services. This chart compares inflation for core goods, housing, and core services ex-housing against the 2011-19 average for each component. Because core inflation ran at 1.6% over this period, not every component would need to return to the 2011-19 average for the Fed to reach its target (which is depicted in the red line). In May, housing services were just 0.23 pp above the pre-pandemic contribution to 12-month inflation. Nonhousing services were 0.59 pp above their contribution to the prepandemic average inflation rate. Core goods, however, were 0.27 pp above the pre-pandemic average. Last year, they had returned to the pre-pandemic (of essentially no inflation).