US inflation rose again in May, marking the highest pace in four decades. The overall consumer price index climbed 8.6 percent year over year, driven mainly by surges in energy costs. The month-to-month increase was about 1 percent from March to April, signaling persistent price pressure amid shifting energy markets and consumer demand.
Note: monthly data released this Friday by the Bureau of Labor Statistics shows the May reading was stronger than most analysts anticipated, following a period in which April saw the first yearly decline in seven months.
This uptick comes alongside expectations that the Federal Reserve would respond with another rate adjustment at its upcoming policy meeting. Markets had been braced for a half-point increase as policymakers consider how best to curb inflation without stalling economic growth.
The overarching rise in prices is largely attributed to energy, with housing and food contributing as secondary forces. Energy components such as gasoline, crude oil, electricity and natural gas collectively weighed on households, reflecting a 3.9 percent increase from April and a 34.6 percent rise over the past year. This marks the largest annual energy spike since the data series began in 1935.
Compared with April, energy costs moved higher by 3.9 percent, reversing a 2.7 percent drop recorded in March. Food prices also climbed, up 10.1 percent over the year, with notable inflation in supermarkets and restaurants—supermarket purchases rising around 11.9 percent and food away from home climbing about 7.4 percent.
Both food and energy figures contributed to the fastest inflation pace seen in the nation in four decades. Excluding food and energy, core inflation stood at roughly 6 percent on a year-over-year basis, underscoring broad price pressures beyond volatile sectors.
Housing costs, which carry significant weight in the core calculation, rose about 5.5 percent over the year, with a monthly gain near 0.6 percent. The combination of rising housing and energy prices has become a primary concern in the inflation narrative, influencing household budgets and policy responses alike.
The price surge has become a focal point for President Joe Biden, who has framed inflation control as his economy’s top priority. In remarks delivered at a port city this Friday, he reiterated the challenge of inflation while also attributing much of the rise to external shocks from the war in Ukraine and the actions of foreign leaders that affect global energy markets.
In a candid moment, the president reflected on personal experiences with rising costs, noting conversations at the kitchen table about higher gasoline and food prices. These comments underscore the tangible impact of inflation on everyday life in places like Scranton, Pennsylvania, where many households feel the pinch of higher bills.
The wage picture remains a balancing act. While a stronger labor market can support consumer purchasing power, it also tempers the pace of price normalization by allowing employers to raise wages to attract workers, potentially sustaining higher prices for goods and services in food, energy, and other essentials.
Labor market signals suggest some cooling is underway. May data, along with April figures, show slower growth than earlier months, hinting at a softer trajectory for the economy even as the unemployment rate hovered near historically low levels around 3.6 percent in May. The broader view indicates a transition toward moderation rather than a sharp downturn.
Amid rising price pressures, questions persist about the risk of a recession and the policy path ahead. The Federal Reserve is expected to continue tightening policy, with current rates in the range of 0.75 to 1 percent and expectations of further half-point hikes if labor markets remain robust. Minutes from the latest meeting point to a plan for continued rate increases at upcoming sessions, reflecting a careful effort to anchor inflation without derailing job growth.