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A driver refuels a vehicle at a Shell gas station in Hercules, California, May 21, 2026.<\/p>\n
David Paul Morris | Bloomberg | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Consumer prices<\/a> in May rose at their fastest pace in more than three years as the Iran war continued to put upward pressure on gasoline and other energy-related costs. <\/p>\n The consumer price index, a key inflation gauge, increased to 4.2% last month relative to a year earlier \u2014 the highest annual inflation rate since April 2023<\/a> and an increase from 3.8% in April<\/a>, the U.S. Bureau of Labor Statistics said Wednesday. <\/p>\n \u201cInflation is painfully high,\u201d said Mark Zandi, chief economist at Moody\u2019s. \u201cAnd while it\u2019s likely peaking given the recent decline in oil and gasoline prices, it\u2019s not going to go back to anything we feel good about for a long time.\u201d<\/p>\n The current inflation rate<\/a> is roughly double the Federal Reserve\u2019s 2% long-term target, Zandi said. It will likely take until this time next year for inflation to decline to policymakers\u2019 target, all else equal, Zandi said. <\/p>\n<\/div>\n Joe Seydl, a senior markets economist at J.P. Morgan Private Bank, pointed to three main factors responsible for higher inflation in the U.S. economy right now.<\/p>\n For one, an \u201coil shock\u201d in the Middle East has raised gasoline and other energy prices, he said. <\/p>\n Energy accounted for more than 60% of the monthly increase in the consumer price index for May, the Bureau of Labor Statistics said Wednesday. <\/p>\n Additionally, tariffs imposed by the Trump administration have raised the costs to import goods, Seydl said. An artificial intelligence \u201ccapital spending boom\u201d has also increased consumer costs in categories like electronics and electricity, for example, he said. <\/p>\n<\/div>\n The inflation report comes ahead of a Federal Reserve policy meeting next week, when officials will choose whether to raise or lower interest rates or keep them unchanged. <\/p>\n That meeting will be the first helmed by Chair Kevin Warsh, President Donald Trump\u2019s pick to lead the U.S. central bank. Warsh was sworn in last month to replace outgoing chair Jerome Powell. <\/p>\n<\/div>\n Chairman of the Federal Reserve Kevin Warsh delivers remarks after being sworn in during a swearing-in ceremony in the East Room of the White House on May 22, 2026 in Washington, DC. <\/p>\n Roberto Schmidt | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n Trump has made no secret of his desire for lower interest rates<\/a> \u2014 and of his displeasure toward Powell\u2019s refusal to lower rates as quickly or steeply as the president desired. <\/p>\n \u201cYou watch what\u2019s going to happen. I had a rotten head of the Fed, and now I have a great head of the Fed,\u201d Trump said at a campaign-style rally in Suffern, N.Y., after Warsh\u2019s swearing in. <\/p>\n However, higher inflation, coupled with a hotter-than-expected jobs report on Friday, may make it less likely the Fed will cut rates in the near term<\/a>, economists said. In fact, it may even hike interest rates this year, depending on the trajectory of inflation, economists said. <\/p>\n<\/div>\n As a result, prices have risen sharply for gasoline and other energy products refined from crude oil. Those refined products include jet fuel and diesel, which are respectively key inputs for airline fares and the transportation of food and goods<\/a> to store shelves. <\/p>\n Prices among all motor fuels were up 41% in May versus a year earlier, according to the consumer price index.<\/p>\n Consumers paid about $4.31 per gallon, on average, at the gasoline pump as of June 1, according to weekly data<\/a> published by the U.S. Energy Information Administration. Those prices are up 38% from $3.13 a year earlier and up from $4.12 on April 27.<\/p>\n Average prices have declined a bit since the start of <\/strong>June, to $4.15 per gallon, according to EIA data. <\/p>\n<\/div>\n Airline fares were up about 27% in May from a year earlier, according to the consumer price index. <\/p>\n That\u2019s largely on the back of elevated prices for jet fuel, economists said. A gallon of jet fuel cost $3.23, on average, as of Monday, up from $2.50 per gallon before the Iran war, according to an Argus Media jet fuel price index<\/a>. However, prices steadily declined throughout May.<\/p>\n Economists said there\u2019s room for oil prices to drift upward if the Iran war were to continue. <\/p>\n \u201cThe Middle East situation is still unresolved,\u201d Seydl said. \u201cWe are approaching critical levels of inventories in the global economy, and the Strait of Hormuz is still largely closed. If this were to keep going, our estimates are that by October or November, you\u2019ll likely see higher global oil prices.\u201d<\/p>\n<\/div>\nWhat is causing higher inflation?<\/h2>\n
The Iran war inflation impact <\/h2>\n