Inflation Moves Higher as Energy Costs Keep Climbing

In May, consumer prices increased 0.5% from April and 4.2% over the year, up from the 3.8% annual rise in April and the greatest over-the-year increase since April 2023. Core CPI, which excludes more volatile energy and food prices, rose 0.2% from April and 2.9% over the year, up slightly from the 2.8% 12-month increase the month prior.

Energy costs climbed 3.9% over the month in May, after rising 3.8% in April. Over the year, energy costs surged 23.5%, after increasing 17.9% year-over-year in April. Within the energy index, gasoline prices rose 7.0% in May and 40.5% over the year, while fuel oil prices moved up 3.8% month-over-month and 58.9% year-over-year. Meanwhile, electricity prices stepped up 0.6% in May and grew 5.9% from May 2025, while natural gas prices decreased 0.5% over the month but were up 3.0% over the year.

In May, food prices ticked up 0.2% over the month and rose 3.1% over the year, down slightly from the 3.2% year-over-year advance in April. Prices for food at home ticked up 0.1% from April and increased 2.7% from May 2025, while prices for food away from home moved up 0.3% month-over-month and 3.5% year-over-year. Of the different food groups, beef and veal, coffee and fresh vegetables rose at the fastest pace, surging 12.9%, 17.5% and 11.9% over the year, respectively.

The shelter index climbed 0.3% from April and 3.4% over the year, up slightly from the 3.3% annual gain in April. Meanwhile, prices for used cars and trucks ticked up 0.1% over the month but declined 2.0% over the year, while new vehicle prices moved down 0.3% over the month but inched up 0.2% from May 2025. At the same time, prices for motor vehicle maintenance and repair increased 0.8% month-over-month and 6.1% year-over-year.

The headline inflation rate is still well above the Federal Reserve’s target of 2.0% and continues to rise from its 2025 lows, with increased pressure from the war in the Middle East. Federal Reserve officials held their interest rate target steady at their April meeting, and markets anticipate that the Federal Open Market Committee will keep its interest rate target unchanged again at the meeting next week as risks to the Federal Reserve’s inflation mandate rise.