Consumer prices jumped 4.2% in May compared to a year ago, the Labor Department reported Wednesday, marking the third consecutive monthly increase and the highest inflation reading in three years.
The primary driver is energy costs. Iran’s closure of the Strait of Hormuz choked off roughly a fifth of global oil supply, pushing average U.S. gas prices from $4.04 in mid-April to $4.49 in mid-May. Prices have since eased to around $4.16 nationally, which could cool June’s inflation figures.
Outside energy, price pressures were more contained. Core inflation, which strips out food and energy, rose just 0.2% monthly, down from 0.4% in April. Still, clothing is up 4.8% year-over-year, airline fares have surged nearly 27%, and electricity costs are up 5.9%.
The data puts new Fed Chair Kevin Warsh in a difficult position. Markets now expect a rate hike by December rather than cuts, as Fed officials increasingly signal that their next move will likely be upward.
