The Consumer Price Index advanced by 4.2% in the twelve months through May, marking the fastest annual increase since April 2023, according to new data from the Bureau of Labor Statistics. This latest figure represents an acceleration from April’s 3.8% rate. On a monthly basis, prices rose 0.5%, with energy costs accounting for the majority of that gain. Both figures are inline with economist expectations.
Energy prices rose sharply in May, with the energy index climbing 3.9% month over month. Over the past year, energy prices are up 23.5%, and gasoline prices increased 7.0% in May alone and 40.5% compared to last year.
When excluding food and energy, core inflation increased 0.2% for the month and 2.9% over the past twelve months. The monthly core inflation rate was slightly below the 0.3% economists had expected, providing a modest boost to financial markets. Shelter costs, which are monitored closely by Federal Reserve officials, rose 0.3% in May, a slower pace than the 0.6% increase seen in April.
Food prices increased 0.2% last month, with grocery costs up 0.1% and food eaten outside the home, such as at restaurants, up 0.3%. The annual increase for the food index was 3.1%.
Other categories showed mixed results. Communication prices grew by 1.3%, airfares jumped 2.7%, while motor vehicle insurance declined 1.7%. New vehicles saw prices fall 0.3%, and the broader transportation services basket slipped 0.6%.
The release of these inflation numbers comes ahead of the Federal Reserve’s upcoming interest rate announcement on June 17. Prior to Wednesday’s report, markets were almost certain that rates would be left unchanged at that meeting, which will also be the first led by Federal Reserve Chair Kevin Warsh.
