US Consumer Inflation Hits Fresh Three-Year High In May

The consumer price index (CPI) rose 4.2 per cent year-on-year, up from April’s 3.8 per cent figure, the US Bureau of Labor Statistics said.

It was the highest reading since April 2023, according to official data, but in line with analyst expectations.

The US-Israel war against Iran, launched in late February, has sent energy prices soaring after Tehran retaliated by virtually closing the vital Strait of Hormuz, through which roughly a fifth of global oil and gas normally passes.

US President Donald Trump has insisted that the price shock will be temporary and that a peace deal will be signed soon, but the soaring costs are a key issue for voters as they head to midterm elections in November.

May’s consumer inflation data showed energy prices had risen 23.5 per cent over the same time last year, with gasoline rising by 40.5 per cent.

Grocery prices also rose significantly for the second month in a row, up 2.7 per cent over a year ago.

The US Federal Reserve has a long-term two-percent target for inflation, and the central bank’s rate-setting committee will meet next week to set interest rates.

Markets expect them to keep rates steady at this meeting, but are now pricing in rate hikes for later in the year, spooking equity investors.