U.S. inflation is expected to have climbed for a third straight month in May, with a closely watched cpi report due Wednesday morning likely to show prices rising 4.2% from a year earlier. That would be the highest annual pace since early 2023 and well above the 2.4% rate reached before the war with Iran.
The Bureau of Labor Statistics will release the Consumer Price Index at 8:30 a.m. ET, giving investors and households a fresh read on whether the latest burst in energy costs is still feeding through the economy. Economists surveyed by Dow Jones expect the May report to extend the recent climb in inflation and keep the Federal Reserve under pressure as it weighs its next move.
Neil Chapman, who warned at a Bernstein investment conference last month that prices could shoot up if energy stockpiles reached critical low levels, is part of the reason markets are paying such close attention to this report. Since the war with Iran began, oil prices have risen nearly 40%, and U.S. crude briefly topped $115 per barrel in early April before easing back.
Gasoline at the pump has also come down from its peak this year, but not nearly enough to relieve the squeeze on consumers. Retail gasoline prices have fallen 40 cents from their high, yet drivers are still paying about 40% more on average than they were before the war began. That is the kind of gap economists worry can keep inflation sticky even when some headline prices cool.
Core inflation, which strips out food and energy, is expected to come back to near 3% in May, suggesting the biggest shock is still concentrated in fuel. Even so, U.S. employers added 172,000 jobs in May, and traders still see a rate hike by December with a 60% chance one could come by October. Tariffs proposed for products from 60 countries could add another layer of pressure if they are finalized, leaving the next phase of the inflation fight tied to both energy and trade.
