US consumer prices accelerated in May, with CPI up 4.2% YoY in the 12 months to
May — the biggest gain since April 2023 — and 0.5% MoM versus 0.6% in April.
Higher gasoline and energy prices linked to the Middle East conflict were a key
driver. CPI’s third consecutive monthly jump and the second month in which
inflation exceeded wage growth add to downside risks for activity and bolster
the case for the Fed to keep policy rates on hold into 2027. There are signs
consumers are drawing on savings to cover spending, and the sharp rise in living
costs is a political headwind ahead of November’s midterms.
