Inflation rose 2.4% in May compared to the prior year, a slight uptick from April’s 2.3% annual increase, consumer price index (CPI) data released Wednesday revealed.
Consumer prices rose 0.1% on a seasonally adjusted basis for the month, following a 0.2% rise in April, according to the U.S. Bureau of Labor Statistics (BLS).
The May inflation readings were tamer than expected and showed that the early impacts of the Trump administration’s tariff policies had less of an inflationary effect than anticipated. Economists polled by FactSet had predicted that prices would rise 2.5% year over year.
Core inflation, which excludes more volatile food and energy prices, rose 0.1% month over month and 2.8% over the past 12 months. Economists surveyed by Dow Jones had expected monthly and annual increases of 0.3% and 2.9%, according to CNBC.
Food prices rose 0.3% in May for both groceries and prepared food consumed away from home. By contrast, overall energy prices fell 1% for the month, with gasoline prices dipping 2.6%.
The shelter index, a measure of housing costs, climbed 0.3% in May. The BLS report noted the shelter index was the “primary factor” in driving inflation upward for the month.
While inflation remains above the Federal Reserve’s stated 2% target, First American Senior Economist Sam Williamson said May’s lower-than-expected reading will increase the pressure on the Fed to lower interest rates later this year.
“May CPI inflation data came in cooler than expected as goods prices were flat month over month, with prices on tariff-sensitive items, like autos and apparel, declining,” Williamson said in a statement provided to Scotsman Guide. “While the softening inflation data is not enough to spur immediate Federal Reserve action, the May CPI report bolsters the case for rate cuts later this year — though signs of tariff-driven inflation will stay in focus.”
A team of Wells Fargo economists maintained that’s it’s premature to draw long-term conclusions about the inflationary impacts of tariffs from the May data.
“We believe it is too early to declare victory and say that the significant increase in tariffs over the past few months will have no material impact on consumer price growth,” the Wells Fargo analysis stated. “Most of the tariff increases occurred over the March-May period, and we doubt enough time has elapsed for the full effects of these policy changes to be felt on output, hiring and pricing. We still look for the core CPI to rise to a little over 3% the next few quarters, largely due to higher tariffs.”
President Donald Trump quickly claimed victory on the inflation numbers in a social media post Wednesday morning. Writing in all caps for emphasis, Trump renewed calls for the Fed to cut interest rates by a full percentage point at its monetary policy meeting next week.
“CPI JUST OUT. GREAT NUMBERS!” Trump wrote. “FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!”
