U.S. import prices fell by the most in five months in May amid a broad decline in the cost of goods, the latest indication of muted inflation that strengthens the case for the Federal Reserve to cut interest rates this year.

The Labor Department said on Thursday import prices dropped 0.3% last month, the biggest decline since last December. Data for April was revised down to show import prices rising 0.1% instead of climbing 0.2% as previously reported.

Economists polled by Reuters had forecast import prices slipping 0.2% in May. In the 12 months through May, import prices fell 1.5% after decreasing 0.3% in April.

The report came on the heels of data on Wednesday showing consumer prices remained tame in May, supporting financial market expectations that the Fed would cut rates this year.

The calls for an easing of monetary policy are being driven by a slowing economy against the backdrop of worsening trade tensions between the United States and China. President Donald Trump in early May imposed additional tariffs of up to 25% on $200 billion of Chinese goods, prompting retaliation by Beijing.

Trump on Monday threatened further duties on Chinese imports if no deal was reached when he meets Chinese President Xi Jinping at a G20 summit later this month in Japan.

Import prices exclude duties. In May, prices for imported fuels and lubricants declined 1.0% after rising 1.7% percent in the prior month. Imported food prices dropped 0.8% last month after surging 2.7% in April.

Excluding fuels and food, import prices slipped 0.2% in May after falling 0.3% in the prior month. So-called core import prices decreased 1.5% in the 12 months through May. Though the dollar has weakened a bit this year, its gains last year against the currencies of the United States' main trading partners continue to depress core import prices.

The cost of imported capital goods declined 0.1% last month. Prices for imported consumer goods excluding automobiles was unchanged. The cost of goods imported from China edged down 0.1% last month after falling 0.2% in April. Prices fell 1.4% in the 12 months through May, the largest drop since February 2017.

The report also showed export prices fell 0.2% in May after nudging up 0.1% in April. Export prices fell 0.7% on a year-on-year basis in May after gaining 0.2% in April. Soybean prices tumbled 20.6% year-on-year.