Energy prices fell 0.6 per cent from the prior month and 0.5 per cent from a year earlier as all major components in the category fell on an annual basis.
The report from the Labor Department on Wednesday, however, showed some pockets of inflation, with rents and health care costs rising solidly, which could buy the US central bank some time before easing monetary policy.
The Fed faces pressure to cut a key short-term rate as there are signs of slowing economic growth.
While the Fed was widely expected to continue holding rates steady this year, markets are increasingly betting on a rate cut.
Fed Chairman Jerome Powell said last week that the central bank was closely monitoring the implications of the trade war on the economy and would "act as appropriate to sustain the expansion".
The Trump administration last month signaled intent to turn the $5.1 trillion-a-day global currency market into the next battlefield of his trade war with a Commerce Department plan that would allow the U.S.to apply countervailing tariffs on nations seen to be actively driving down their currencies to boost exports.
US inflation rose by 0.1% in May, down from 0.3% in April but in line with the market consensus, Bureau of Labor Statistics data shows.
A report on Tuesday showing core producer prices advancing solidly for a second consecutive month in May had offered hope for a firmer core CPI reading in May, as well as in the inflation measure tracked by the Fed for monetary policy.
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The entire gain in May came from a 0.3% increase in the wholesale price of services. The core PCE price index has been running below the Fed's 2% target this year. Retail sales were down by 0.2% m/m in April but are forecast to have rebounded by 0.6% in May. Food consumed at home increased 0.3%.
Housing costs have been rising steadily as rents have increased 3.7 percent in the latest 12 months, while the rent equivalent for homeowners in up 3.3 percent, according to the data.
Healthcare costs increased 0.3 per cent, matching April's rise. Electricity prices were down 0.8%.
The Pound-to-Dollar rate was 0.11% higher at 1.2737 but is down 0.02% for 2019 after having fallen 2% in the last month.
The index for used cars and trucks slumped 1.4% in May, the fourth straight decline.
Prices medical care, air fares, education, furniture and new autos all rose.