Soaring gasoline prices, triggered by the U.S. war with Iran, have pushed inflation to its highest level in more than three years.
A on Wednesday showed consumer prices in May were up 4.2% from a year ago. That's the biggest annual increase since April of 2023. By contrast, the Labor Department says average wages have risen only 3.4% over the last year, so workers' real spending power has declined.
Prices rose 0.5% between April and May, with higher energy costs accounting for more than 60% of that monthly increase. Gas prices have jumped by well over a dollar a gallon since the war began, strangling shipping traffic in the Strait of Hormuz 鈥� a critical pathway for much of the world's oil supply.
Higher fuel costs also pushed up airfares in May. Airline tickets cost about 27% more than they did a year ago.
Grocery prices showed little change during the month, rising just 0.1%. Stripping out volatile food and energy prices, "core inflation" was 2.9% for the 12 months ending in May, a slightly larger annual increase than the previous month.
Stubborn inflation makes it less likely the Federal Reserve will cut interest rates anytime soon, especially since the U.S. job market . Employers added 172,000 jobs last month.
Gasoline prices have eased in recent days, amid hopes of a possible negotiated settlement between the U.S. and Iran. But with an average price of $4.15 a gallon nationwide, pump prices are still about $1.17 higher than they were before the war began, according to AAA.
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