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Inflation in the United States reached its highest level in three years in May, with the Consumer Price Index standing at 4.2% annually, according to data released this Wednesday by the Bureau of Labor Statistics.
The figure exceeds 3.8% from April and represents the third consecutive monthly increase, directly driven by the war with Iran and the closure of the Strait of Hormuz.
The key data from the May report
Consumer prices rose by 0.5% monthly in May, following increases of 0.6% in April and 0.9% in March, according to the Bureau of Labor Statistics.
The energy sector was the main protagonist.
“The energy index rose by 3.9% in May, after increasing by 3.8% in April and 10.9% in March”, specifying that this index accounted for more than 60% of the monthly increase in the overall index.
Gasoline prices escalated from $4.04 per gallon in mid-April to $4.49 in mid-May.
Although they have since fallen to an average of $4.16, consumers are still paying almost 40% more than before the conflict with Iran began.
Underlying inflation -which excludes food and energy- stood at 2.9% annually, with a more moderate monthly increase of 0.2%.
What do economists say?
The economist Sung Won Sohn from Loyola Marymount University noted in statements cited by CNN that "4.2% remains a concerningly high figure, but the most important news is that the increase was primarily concentrated in energy—especially gasoline—rather than being widespread throughout the economy."
Nancy Van Houten, principal economist for the U.S. at Oxford Economics, warned:
"Inflation may not worsen, but it will remain somewhat elevated for the time being. It is possible that it won't moderate until next year."
Diane Swonk, chief economist of KPMG, was more emphatic.
"We have not yet felt the full impact of the war on food prices. The costs of fertilizers and diesel, the reduction in crop yields, and the potential effects of the El Niño phenomenon: none of this will be fully felt until the autumn harvest and well into the year 2027," he noted.
The impact on salaries and purchasing power
The increase in inflation has outpaced wage growth, which stood at 3.4% annually according to the employment report for May, well below the 4.2% of the CPI.
Real wages adjusted for inflation fell by 0.7% in May, compared to a drop of 0.3% in April, marking the second consecutive month of declining purchasing power.
The rising cost of diesel has increased shipping expenses - with companies like UPS and FedEx implementing fuel surcharges - which is putting pressure on food prices, which have already risen 2.9% year-on-year.
Persistent inflation complicates the outlook for Kevin Warsh, who assumed the presidency of the Federal Reserve in May 2026.
More officials from the central bank now expect the next move to be an interest rate hike rather than a cut, and Wall Street investors are anticipating that increase for December, according to CME Fedwatch.
Economists project that the CPI could reach a peak of between 4.5% and 5% in 2026.
Swonk summarized the situation with a warning: “There is still a lot of impact to come.”
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