US Inflation Hits 4.1% in May, Highest in Three Years on Gas Prices

US inflation accelerated to 4.1% in May, the highest in three years, driven primarily by surging gasoline prices amid geopolitical tensions, according to the Commerce Department's PCE index. The core PCE, excluding food and energy, rose 3.4% year-over-year Source: CNN.

Key data points

• PCE annual rate: 4.1% (up from 3.8% in April) Source: portafolioco
• Core PCE: 3.4% annual, 0.3% monthly Source: infobae
• GDP Q1 revised up to 2.1% annualized Source: CNN
• Gasoline prices averaged $3.92 per gallon after a peace deal with Iran, down from nearly $4.50 Source: infobae

Drivers and outlook

The spike reflected higher energy costs from the Middle East conflict, along with rising prices for semiconductors and AI-related equipment Source: infobae. However, the peace deal with Iran has resumed oil shipments through the Strait of Hormuz, easing crude prices. "The good news is that gas prices have dropped considerably since May," said Heather Long, chief economist at Navy Federal Credit Union, adding that households are already seeing some relief Source: portafolioco. Yet, some analysts caution that inflation may persist due to housing, healthcare, and electricity costs Source: CNN.

Fed and political reactions

The Federal Reserve under new Chair Kevin Warsh has held rates steady, with markets now pricing in possible rate hikes rather than cuts Source: infobae. President Donald Trump has dismissed the rise as "temporary," but the data complicates his push for lower rates Source: CNN.

"The increase in prices has led the Fed to keep its benchmark interest rate unchanged all year," reported Infobae, while some economists expect a rate increase Source: infobae.