US inflation rises to three-year high of 4.2%

U.S. inflation climbed above 4% in May for the first time in more than three years, as a sharp rise in gasoline and other energy costs pushed household prices higher.

Consumer prices rose 4.2% from a year earlier, up from 3.8% in April, the Bureau of Labor Statistics reported Wednesday. It was the fastest annual increase since April 2023, when inflation was still being affected by the energy shock that followed Russia’s invasion of Ukraine.

Prices rose 0.5% between April and May. Higher energy costs accounted for more than 60% of that monthly increase, according to NPR’s account of the Labor Department report. The Bureau of Labor Statistics said the May rise marked the third consecutive monthly increase in the Consumer Price Index, a broad measure of how much prices have changed compared with the same month a year earlier.

The jump was driven largely by fuel. Overall energy bills, including gas and electricity, were almost a quarter higher in May than a year earlier, with petrol responsible for much of the increase, the BBC reported. Separate figures from motoring group AAA put the average price of a gallon of regular gasoline at $4.15, up sharply from $2.98 on Feb. 28, when President Donald Trump launched strikes on Iran. NPR reported that pump prices are about $1.17 higher than they were before the war began.

The rise in energy prices has been tied to the conflict involving the United States, Israel and Iran. The BBC reported that Iran has effectively shuttered the Strait of Hormuz, a crucial waterway that typically handles about one-fifth of the world’s oil and gas shipments. NPR reported that the war has strangled shipping traffic through the strait, a critical pathway for much of the world’s oil supply. Gasoline prices have eased in recent days amid hopes of a possible negotiated settlement between the United States and Iran, NPR reported, but they remain elevated.

Higher fuel costs also spilled into travel. The BLS pointed to rising prices for plane tickets, along with personal and medical care, recreation and communication. NPR reported that airline tickets cost about 27% more than they did a year ago.

Food prices were steadier. Grocery prices rose just 0.1% in May, according to NPR. Excluding volatile food and energy prices, core inflation was 2.9% for the 12 months ending in May, slightly higher than the previous month’s annual reading.

The inflation pickup complicates the Federal Reserve’s next steps. The Fed’s long-term inflation target is 2%, and higher inflation raises the likelihood that policymakers will keep interest rates elevated or raise them to restrain spending. NPR reported that stubborn inflation makes an interest rate cut less likely soon, especially with the U.S. job market appearing to stabilize after employers added 172,000 jobs last month.