May’s CPI report shows headline inflation accelerating to 4.2% while core prices undershoot expectations, complicating Fed policy decisions.
US consumer prices climbed 4.2% year-over-year in May, up from 3.8% in April and marking the highest reading since April 2023. The increase defied expectations for a slower pace of inflation, driven by rising energy and shelter costs.
Core CPI, which excludes food and energy, rose just 0.2% month-over-month, below the 0.3% consensus forecast and half of April’s 0.4% gain. The divergence between headline and core inflation highlights persistent price pressures in volatile sectors.
The data arrives as the Federal Reserve weighs further rate hikes, with markets now pricing a higher likelihood of tightening despite cooling core inflation.