Consumer prices jumped again in May, pushing the annual inflation rate higher to 4.2% as increased energy costs since the Iran war continue to pressure the U.S. economy, according to data in the latest federal government report released Wednesday.
Prior to the launch of the Iran war on Feb. 28, the annual U.S. inflation rate had been running at 2.4%, one of the lowest levels in five years. However, the war has disrupted commercial oil shipping of oil through the Strait of Hormuz, and the pace of inflation has accelerated. The annual inflation rate increased to 3.3% in March, 3.8% in April, and 4.2% in May.
On a monthly basis, the Consumer Price Index for May showed the energy index rose 3.9% last month, which followed a 3.8% increase in April and a 10.9% increase in March. The energy index accounted for 60% of CPI’s monthly all-items index increase in May.
The shelter index rose 0.3% for May, the food index increased 0.2%, and the core index that includes everything except food and energy, rose 0.2% in May.
Major core index items that increased in the month of May include airline fares, medical care, personal care, and recreation. Conversely, major index items that decreased in May include insurance, household furnishings and operations, and new vehicles.
Compared to a year ago, gasoline prices have increased 40.5%, fuel oil has increased 58.9%, airline fares have increased 26.7%, electricity has increased 5.9%, and piped natural gas has increased 3.0%. Food prices have risen 3.1%, and shelter costs have risen 3.6%.
The core index, that includes all items except food and energy, has increased 2.9% compared to May of 2025.
The stock market edged lower immediately after the CPI report was released, but relatively modest declines were seen as evidence that inflation was in line with investors’ expectations.
The 4.2% annual inflation rate in the May report is unlikely to change the Federal Reserve’s cautious approach to lowering interest rates since inflation remains above the Fed’s target goal of 2%.
