Oil Prices Surge, Pushing U.S. Inflation to 4.2% in May, a Three-Year High

U.S. inflation climbed above 4% for the first time in three years, driven by the surge in oil prices caused by the war in Iran. The U.S. consumer price index rose 0.5% in May from the previous month. The inflation rate jumped to 4.2%, compared with an annual rate of 3.8% measured in April. The data, which matched analysts’ expectations, marked the highest inflation level since April 2023, when inflation stood at 4.9%.

The core index, which excludes food and energy prices that are considered volatile, rose 0.2% in May after increasing 0.4% in April and below the expected 0.3%. On an annual basis, core inflation climbed to 2.9%, compared with 2.8% in April and in line with forecasts. High fuel prices in May had an unusually strong effect on overall inflation, pushing costs up at a pace similar to that seen in 2021 and 2022, when inflation was on its way to a four-decade peak and reached 9.1% in June 2022. “People think the consumer price index is the whole story when it comes to the inflation narrative, but the producer price index that will be released tomorrow is also very important,” said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners.