US Inflation Hits 4.2% in May, Highest Since April 2023, as Energy Drives 60% of Monthly Gain

U.S. consumer prices rose 0.5 percent in May on a seasonally adjusted basis, lifting the annual inflation rate to 4.2 percent from 3.8 percent in April — the highest reading since April 2023, the Bureau of Labor Statistics reported June 10. Core CPI, excluding food and energy, rose 0.2 percent on the month and 2.9 percent year over year.

The energy index jumped 3.9 percent in May and accounted for more than 60 percent of the monthly all-items increase, with gasoline up 7 percent on the month and 40.5 percent over twelve months as the Iran war and disruption around the Strait of Hormuz kept crude supplies constrained. Shelter rose 0.3 percent and food 0.2 percent; grocery prices were up 2.7 percent annually, with tomatoes up 32 percent and coffee up 17.5 percent, per CBS News.

The headline print matched the 4.2 percent consensus of FactSet-polled economists. CME FedWatch pricing showed a roughly 96 percent probability the Federal Reserve holds rates steady at its June 16-17 meeting, while markets assigned around 51 percent odds of a hike as early as October, keeping the long end volatile after last week's global bond rout.