U.S. inflation accelerated in May, with the Consumer Price Index (CPI) rising 4.2% year-over-year, up from 3.8% in April and marking the highest inflation rate since April 2023. The increase was largely driven by surging energy prices amid ongoing geopolitical tensions in the Middle East.
Energy costs accounted for more than 60% of the monthly inflation increase, with gasoline prices jumping 7.0% in May and the overall energy index rising 23.5% from a year ago. Higher fuel and utility costs continue to put pressure on household budgets and contribute to rising prices across the economy.
Meanwhile, core inflation, which excludes food and energy, increased to 2.9% annually, up slightly from 2.8% in April. Housing remained a key contributor, with shelter costs rising 3.4% year-over-year.
Food prices also continued to climb, increasing 3.1% annually, while categories such as airline fares, communication services, and personal care posted notable monthly gains. Some areas, including motor vehicle insurance and new vehicle prices, recorded modest declines.
The latest data highlights a growing concern for consumers, as inflation has now outpaced wage growth for a second consecutive month, reducing purchasing power. With energy prices expected to remain elevated in the near term, inflationary pressures may continue to challenge both households and policymakers as the Federal Reserve works toward its 2% inflation target.
