U.S. inflation at 3-year high as gasoline surges 40%
U.S. consumer prices rose 4.2% year-over-year in May, the highest since April 2023, driven by a 40.5% jump in gasoline amid renewed tensions with Iran.
The Bureau of Labor Statistics released the May consumer price index at 8:30 a.m. EDT on June 10, showing a 4.2% year-over-year increase, the largest annual gain since April 2023. The index rose 0.5% from April, marking the third straight month of headline acceleration.
Core CPI, which excludes food and energy, increased 2.9% year-over-year, up from 2.8% in April. On a monthly basis, core inflation was 0.2%, below April’s 0.4% monthly print.
Energy costs were the primary driver of the report. The energy index climbed 23.5% year-over-year. Gasoline rose 40.5% annually and 7.0% in May alone. Fuel oil increased 58.9% year-over-year and electricity costs were up 5.9%. Some analyses estimate movements in oil and fuel accounted for more than 60% of the monthly rise in headline consumer prices.
Food prices rose 3.1% year-over-year, with food away from home up 3.5%. Shelter costs increased 3.4% annually and rent of primary residence rose 0.4% month-over-month. Used cars and trucks fell 2.0% year-over-year.
Hours after the CPI release, President Donald Trump posted on Truth Social about the conflict with Iran, writing: “Iran’s Military is a complete and total mess. Much of it, like their Navy and Air Force, doesn’t even exist anymore. They have been completely defeated.” In a separate post he wrote: “The Fake News Media refuses to report how EFFECTIVE the U.S. Naval BLOCKADE is… NOTHING GETS THROUGH unless we want it to.”
The price moves followed a series of military incidents tied to the Strait of Hormuz, including an alleged downing of a U.S. Army Apache helicopter, U.S. strikes on Iranian air defense infrastructure, and Iranian ballistic missile and drone attacks on U.S. bases in Bahrain, Kuwait and Jordan. The conflict, now roughly in its 103rd day, broke a fragile April ceasefire.
The Federal Open Market Committee is scheduled to meet June 16-17. The report arrives with core inflation running above the Fed’s 2% target and a strong labor market. Rate-cut odds for 2026 had been shrinking prior to the release.
Markets showed an immediate reaction. Bitcoin traded near $61,000 and futures for the S&P 500 and Nasdaq were lower ahead of the open. Longer-dated forecasts project headline inflation moderating to about 3.0% in 2027 and 2.5% in 2028 if energy prices retreat and shipping through the Strait of Hormuz stabilizes.
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