U.S. May Inflation Data Hits a Three-Year High as Energy Prices Surge and Become the Main Driver

According to the latest data released by the U.S. Department of Labor last night, the May Consumer Price Index (CPI) (year-over-year) showed a reported value of 4.2%, which met market expectations and marked the highest level in nearly three years.

Meanwhile, the core CPI (year-over-year) after excluding food and energy prices rose by 2.9% year-over-year, also in line with expectations, reaching the highest level since November 2025.

Based on other data, energy prices are the main factor driving this round of inflation higher. In May, the energy price index rose 3.9% month-over-month, marking the third consecutive month of significant increases, and contributing more than 60% to the overall CPI increase.

Among them, gasoline prices rose 7.0% month-over-month; over the past 12 months, they have cumulatively increased by 40.5%, a stunning gain. Electricity prices rose by 0.6%, while natural gas prices fell slightly by 0.5%.

Although overall inflation has rebounded, the core CPI’s month-over-month growth rate fell by 0.2 percentage points from April to 0.2%, which came in short of market expectations. This suggests that the endogenous momentum of current U.S. inflation appears to be weakening at the margin.

Analysts believe that the latest inflation data means Americans are facing higher living costs and will also bring greater pressure to the Federal Reserve’s monetary policy.

The market expects the Federal Reserve to most likely “hold steady” at its June policy meeting and keep the current interest rate level unchanged. The CME Group “FedWatch Tool” shows that the probability of the Fed raising rates by the end of this year has risen to over 67%.

Looking ahead, as the low-base effect fades and international oil prices remain relatively stable, analysts believe that the U.S. inflation rebound in the short term may already be over, with the near-term peak having passed.

However, if relatively high oil prices are maintained over the long term, the extent to which core inflation will be affected still needs to be watched. Coupled with the upcoming summer travel peak and the arrival of the World Cup events, whether core inflation can decline smoothly remains a matter that warrants continued attention.

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