Consumer prices in May proved inflation still has a stranglehold on the country, rising 8.6% from one year ago — the fastest pace in 40 years. May’s data exceeds expectations with analysts believing prices had peaked in March at 8.5% before falling to 8.3% in April, but rising energy and food prices continue to burden Americans.
Month over month, prices in May increased 1.0%, compared with a much slower pace of 0.3% in April.
Excluding food and energy, core inflation was up 6.0% in May compared with one year ago, down from April’s 6.2% rate. The report showed no sector saw prices drop in May after used vehicles and apparel showed some relief in April.
While the Federal Reserve pays closer attention to core prices, which are less volatile than food and energy, many Americans are feeling the most price pain precisely in those two areas. On Friday, the day the Bureau of Labor Statistics released the latest inflation report, the national gas price average reached $4.986 per gallon, a new national record and nearly $2 higher than a year ago, according to American Automobile Association.
- Energy prices are up 3.9% from April to May and 34.6% on the year.
- Gas prices are up 4.1% from April to May and 48.7% on the year.
- Groceries are up 1.4% from April to May and 11.9% on the year.
Housing continues to be heated, with the shelter index up 5.5% in May compared with a year ago, which many experts say is less than the true cost increase. However, economists predict the housing and rental market is showing signs of cooling off in the coming months.
The same can’t be said for food and energy, which continues to rise at double digit annual rates. Russia’s war on Ukraine and resulting sanctions continue to exacerbate these two price categories.
In order to clamp down on high prices and eventually reach the Federal Reserve’s target inflation rate of 2%, the central bank has started to tighten monetary policies. After twice raising its benchmark interest rate in March and May, the market expects the Fed will boost it another 50 basis points on June 15, the same day it begins shrinking its $8.9 trillion balance sheet to pull money from the overheated economy.