U.S. consumer prices rose 4.2% from a year earlier in May, matching forecasts but marking the highest annual inflation rate in three years.
U.S. consumer prices accelerated in May, rising 0.5% on a seasonally adjusted basis and lifting the annual inflation rate to 4.2%, the Bureau of Labor Statistics reported Wednesday.
The headline figures matched Dow Jones consensus estimates and marked the highest annual inflation reading in three years. The rate was up from 3.8% in April and crossed 4% for the first time since 2023, keeping pressure on households and policymakers as energy costs rose sharply.
The main driver was energy. Energy prices increased 3.9% for the month and were up 23.5% from a year earlier, according to the report. The increase added to consumer strain in categories tied closely to household budgets, even as some measures underneath the headline number were less heated.
Core CPI, which excludes volatile food and energy prices, rose 0.2% in May and 2.9% from a year earlier. The annual core reading matched expectations, while the monthly increase was below the 0.3% forecast and slower than April’s 0.4% gain.
Other details in the report were mixed. Food prices rose 0.2%, while shelter costs increased 0.3%, half April’s pace. Shelter, a major component of the index and a closely watched category for Federal Reserve officials, was up 3.4% over 12 months.
Transportation services declined 0.6%, and services excluding energy services rose 0.3% after a 0.5% increase in April. New vehicle prices fell 0.3%, used cars and trucks edged up 0.1%, airline fares rose 2.7% and motor vehicle insurance declined 1.7%.
The report lands ahead of the Federal Reserve’s June 17 interest-rate decision. Markets largely expect the rate-setting Federal Open Market Committee to leave rates unchanged, but investors are watching for how officials frame the inflation pickup and the risk that higher oil prices could spread into other parts of the economy.
After the CPI release, stock futures remained negative but were off their lows, while Treasury yields were little changed. Futures markets indicated traders still expected the Fed to remain on hold for much of the year, with the next move priced as a possible rate increase in December.
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