American consumer prices hit a three-year high in May, with energy costs soaring 23.5%
US consumer prices accelerated in May 2026, rising 4.2 per cent over the prior year as a surge in energy costs drove headline inflation to its highest level in three years, according to data released Wednesday by the U.S. Bureau of Labor Statistics.
The Consumer Price Index for All Urban Consumers rose 0.5 per cent on a seasonally adjusted basis in May, following a 0.6 per cent increase in April. The 4.2 per cent annual gain compares with 3.8 per cent for the 12 months ending April.
The index for energy rose 3.9 per cent in May and accounted for more than 60 per cent of the monthly all-items increase. Over the past 12 months, the energy index climbed 23.5 per cent. Gasoline prices rose 7.0 per cent for the month and 40.5 per cent over the year. The fuel oil index increased 58.9 per cent over the same 12-month period.
The energy shock was triggered by the conflict with Iran, which has driven global energy prices sharply higher since the spring.
Core inflation
The index for all items less food and energy rose 0.2 per cent in May, following a 0.4 per cent gain in April, and was up 2.9 per cent over the past 12 months. The monthly gain was below the 0.3 per cent analyst estimate and less than the 0.4 per cent increase recorded in April.
The shelter index rose 0.3 per cent for the month and 3.4 per cent over the year. The food index increased 0.2 per cent over the month and 3.1 per cent over the past 12 months. Food away from home rose 3.5 per cent over the year, while food at home was up 2.7 per cent.
Among categories that declined in May, the motor vehicle insurance index fell 1.7 per cent, household furnishings and operations dropped 0.6 per cent, and new vehicles were down 0.3 per cent. Transportation services fell 0.6 per cent for the month.
Market reaction and Fed outlook
Stock market futures held in negative territory but were off their lows following the release, while Treasury yields were flat, according to CNBC. The report comes as Federal Reserve officials consider their next move on interest rates. Markets largely expect the rate-setting Federal Open Market Committee to remain on hold when it meets June 17.
Economists surveyed by CNN say the current bout of inflation is not expected to be as severe as the last cycle, with projections placing the peak CPI in the range of 4.5 to 5 per cent this year.
The next Consumer Price Index report, covering June 2026, is scheduled for release on Tuesday, July 14, 2026, at 8:30 a.m. Eastern Time, according to the Bureau of Labor Statistics.
