Inflation Passes Unfavorable Mark For First Time Since 2023

Inflation ticked up to 4.2% in May, according to data released Wednesday by the Bureau of Labor Statistics. 

The 4.2% increase was in line with expectations, with analysts predicting a 0.4 percentage-point increase from April’s 3.8% annual rate. The inflation increase was driven primarily by higher energy costs as oil prices surged amid tensions in the Middle East. The inflation report showed energy prices accounted for more than 60% of the monthly increase in the Consumer Price Index, with gasoline prices rising sharply, up 8.6% before seasonal adjustment. Shelter costs also continued to climb, rising 0.3% during the month, while food prices increased 0.2%. 

“It’s not a good number,” former Dallas Fed President Richard Fisher told CNBC. “I think the consumer is under tremendous pressure, and we’re just going to have to see if this is going to abate.”

Fisher added that if he were Fed chair, he would leave interest rates unchanged for now to allow more time to assess the economy.

Stocks, which are edging lower on the data, started the day with a downward trend after President Donald Trump blasted Iran for taking “too long to negotiate a deal that would have been great for them.”

“Now they will have to pay the price!!!” Trump added. 

After Trump’s message, Brent crude oil futures jumped to around $93 per barrel. Higher energy prices have become the Trump administration’s Achilles’ heel for inflation. Higher energy prices have become a persistent challenge for the Trump administration’s efforts to bring inflation lower. After nearly a month of conflict with Iran, the energy index rose 3.9% in May, up from a 3.8% increase in April.

The latest data continues a trend of steadily rising inflation since February. While Federal Reserve policymakers have signaled patience in recent months, the continued acceleration in prices could complicate the central bank’s path forward. Investors who had hoped for interest rate cuts later this year are now debating whether officials will instead keep rates elevated for longer, or consider additional rate hikes if inflation remains stubbornly high.