The United States Consumer Price Index (CPI) accelerated to 4.2% year-over-year in May, marking the highest reading since April 2023, according to data released by the Bureau of Labor Statistics on Wednesday morning. On a monthly basis, prices rose 0.5%, a slight deceleration from April’s 0.6% gain and in line with economist forecasts.
Energy remained the dominant force behind the increase. The energy index surged 3.9% from April, accounting for over 60% of the overall monthly rise. Gasoline prices alone jumped 7.0% (seasonally adjusted), reflecting sustained pressure tied to the ongoing conflict with Iran. Over the past 12 months, the energy index has soared 23.5%, with gasoline up 40.5%.
Core inflation offered a mixed signal. Core CPI, which excludes volatile food and energy components, rose 2.9% year-over-year, matching expectations. The monthly core gain of 0.2% came in below the anticipated 0.3%, easing immediate fears of aggressive Federal Reserve rate hikes. Shelter costs increased 0.3%, with owners’ equivalent rent up 0.3% and rent rising 0.4%.
Food prices moderated, with the overall food index up 0.2% after jumping 0.5% in April. Grocery prices edged just 0.1% higher, while dining out continued to climb (+0.3%), pushing the year-over-year rise for food away from home to 3.5%. A 2.9% drop in cheese prices helped pull dairy down.
For workers, real average hourly earnings slipped 0.1%, meaning wages lost ground against inflation. The report reaffirmed that annual inflation is now above 4% for the first time in three years, feeding expectations of further monetary tightening.
