US inflation hit 4.2% in May, highest annual rate since 2023
Why it matters: Hotter prices before next week's Fed meeting could delay rate cuts and raise the risk of a hike later this year.
US consumer prices rose 4.2% in May from a year earlier, the fastest annual pace since April 2023, as higher energy costs drove much of the increase. The reading, released Wednesday by the Bureau of Labor Statistics, was up from 3.8% in April and remained well above the Federal Reserve's 2% target. Energy made up more than 60% of the monthly gain in the consumer price index, with the Iran war pushing up gasoline and related costs. Economists cited tariffs and heavy AI-related capital spending as additional sources of price pressure. The report lands just before the Fed's next policy meeting, the first under Chair Kevin Warsh, and may make near-term rate cuts less likely after a stronger-than-expected jobs report last week.