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Consumer prices increased 0.1% over the month and 2.4% over the year in May, edging up from the 2.3% rise in April. Core CPI, which excludes more volatile energy and food prices, edged up 0.1% over the month and rose 2.8% over the year, the same as the 12-month increase in March and April.

Energy costs fell 1.0% over the month in May, driven by a 2.6% drop in gasoline, and declined 3.5% over the year. Meanwhile, fuel oil and electricity both rose 0.9% over the month, and utility (piped) gas prices climbed 15.3% over the year.

Food prices increased 0.3% over the month in May, with prices for food at home and food away from home rising at the same rate, and were up 2.9% over the year in May. The indexes for major grocery store food groups were mixed, with half increasing and the other half decreasing. Over the year, the index for food at home advanced 2.2%, driven by a 6.1% increase in the meats, poultry, fish and eggs index.

Shelter grew 0.3% over the month and 3.9% over the year, dipping slightly from the 4.0% 12-month increase in April. Meanwhile, prices for transportation services slipped 0.2% over the month but rose 2.8% over the year, with airline fares leading the monthly decline, falling 2.7% in April and 7.3% since April 2024. These decreases offset increases in motor vehicle insurance, which rose 0.7% over the month and 7.0% over the year.

Since May 2024, the over-the-year headline inflation rate has trended downward, but the risks and expectations of higher inflation have risen. Therefore, markets are anticipating that the Federal Open Market Committee will keep rates steady, as it did in May, at its meeting later this week. On the other hand, the expectation to cut rates later in the year are rising as inflation risks remain muted and weakness in the labor market have increased slightly.