An official government report has confirmed what you may have already noticed at the gas station and grocery store: inflation is on the rise.

Inflation Surged To Three-Year High In May

Updated June 10, 2026

01:27 PM EDT

Key Takeaways

The Consumer Price Index rose 4.2% over the year in May, the highest since 2023 and matching forecaster expectations.
The increase was mainly due to a surge in energy prices because of the Iran war is cutting off oil supplies.
Concerns about the cost of living flared up amid the pandemic and have lingered in its aftermath.

An official government report has confirmed what you may have already noticed at the gas station and grocery store: inflation is on the rise.

The Consumer Price Index rose 4.2% over 12 months in May, the Bureau of Labor Statistics said Wednesday.1 That's up from a 3.8% annual increase in April and the highest since April 2023. The jump was in line with forecasters' expectations.

The increase mainly reflects a surge in fuel prices driven by the Iran war. Fighting has effectively cut off oil supplies that would normally flow through the Strait of Hormuz between Iran and Oman. Core prices excluding food and energy rose 2.9% over 12 months, up from 2.8% in April, an indication that higher transportation costs are being passed along into other products.

“Americans are getting squeezed financially by inflation that’s back at a three-year high," Heather Long, chief economist at Navy Federal Credit Union, wrote in a commentary. "It’s not just bad vibes about the economy now; there are real financial pressures, especially on middle-class and lower-income households."

What This Means For The Economy

Although inflation is running high and squeezing household budgets, the smaller-than-expected uptick of core inflation reduces pressure on the Federal Reserve to raise interest rates later in the year.

Although gasoline prices have fallen since late May, they remain well above pre-war levels, with a gallon of regular averaging $4.15, up from $2.98 at the end of February, according to AAA.2 The price hikes have added to the cost-of-living worries that have piled up since the pandemic: key inflation measures have been above the Federal Reserve's 2% annual target since 2021.

The rise in energy prices, which were up 23.5% over the last year, more than offset decreases in the prices of new cars, car insurance, and household furnishings. Energy was responsible for more than 60% of the increase, the bureau said.

Rising inflation is eating into household budgets, outpacing pay raises. The buying power of a typical hour's pay was down 0.1% in May compared to April, and down 0.7% compared to last May, the bureau said in a separate data release about inflation-adjusted earnings.3

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The report held a few silver linings for the trajectory of price increases going forward. Core prices rose 0.2% from April, below forecasters' expectations.

Economists generally view core prices as a better guide to persistent inflation trends. The fact that the biggest price hikes were in gasoline and air fares suggested the war-related inflation was less "contagious" than it seemed in April, at least for the time being.

The limited uptick of core inflation could take some of the pressure off the Federal Reserve to raise interest rates later in the year. Some Fed officials have grown increasingly vocal about the possibility of lifting the central bank's fed funds rate, which influences borrowing costs on all kinds of loans. Officials may want to discourage borrowing and spending and allow supply and demand to rebalance.

Relatively tame core inflation takes away some of the urgency for rate hikes, however.

"Overall, this report may be slightly comforting to the Fed, given milder core inflation," Preston Caldwell, chief U.S. economist at Morningstar, wrote in a commentary. "But it’s not too late for high energy prices to spread into the rest of the index."

Whether May is as high as inflation gets depends largely on what happens with the Iran war, especially whether shipping can resume through the strait. Energy prices have fallen on the assumption that the U.S. and Iran are close to a peace deal that would reopen the waterway, but prices could rise again if the negotiations fail to yield progress.

"Based on current prices and market expectations, May should be the peak for energy prices," Caldwell wrote. "As it stands, we should see a large drop in CPI energy when the June data is released. However, current market and futures prices are arguably predicated on a high probability that the Strait of Hormuz will begin reopening within the next month."

Some economists saw evidence that inflation was held in check in May by the reduction in tariffs resulting from the Supreme Court's striking down most of the import taxes President Donald Trump imposed last year. Prices for physical products other than food and energy, the category most influenced by tariffs, actually fell slightly in May, the first such decline in a year.4 That relief may prove short-lived as the administration moves to impose more tariffs later this summer.

"The reduction in tariffs, even if temporary, may have been serendipitously timed and may be offsetting some of the effects of the spike in energy prices on core inflation," David Royal, chief investment and financial officer at Thrivent, wrote in a commentary.

***Update, June 10, 2026ı—***This article has been updated after publication with more detail from the CPI report and commentary from experts.

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Bureau of Labor Statistics. "Consumer Price Index."
AAA. "Fuel Prices."
Bureau of Labor Statistics. "Real Earnings Summary."
Bureau of Labor Statistics via Federal Reserve Economic Data. "Consumer Price Index for All Urban Consumers: Commodities Less Food and Energy Commodities in U.S. City Average."

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