| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | 0.5% | 0.3% to 0.7% | 0.5% | 0.6% |
| CPI - Y/Y | 4.2% | 3.9% to 4.3% | 4.2% | 3.8% |
| Ex-Food & Energy- M/M | 0.3% | 0.2% to 0.5% | 0.2% | 0.4% |
| Ex-Food & Energy- Y/Y | 2.9% | 2.8% to 3.0% | 2.9% | 2.8% |
Highlights
The U.S. consumer price inflation story remains one where energy prices are driving the overall surge in headline CPI. The May CPI report again shows the inflationary impact of the Iran conflict, with energy accounting for over 60 percent of the headline spike, as well as a knock-on effect on other important categories like food as well as airfare (up 2.7 percent on a monthly basis).
The unpopularity of AI data centers and their impact on electricity bills will not be helped by this report electricity costs were up 0.6 percent last month and jumped 5.9 percent compared to a year ago.
Core consumer prices (excluding food and energy) rose at a slower pace in May, but the ongoing tariffs impact apparel prices (up 0.3 percent month-over-month and +4.8 percent vs. last year), for example continues.
Expect the Federal Reserve to remain in a holding pattern but drop the easing bias from its monetary policy statement when the Federal Open Market committee meets next week.
The Consumer Price Index in May rose 0.5 percent, compounding the 0.6 percent pace set in April, and +0.9 percent in March. The May CPI reading matched expectations for a 0.5 percent rise in the Econoday survey of forecasters.
Over the last 12 months, consumer prices are up 4.2 percent, compared to a 3.8 percent rise in April. Expectations in the Econoday survey were for a 4.2 percent spike.
Core CPI, excluding food and energy prices, is up 0.2 percent in May, following a 0.4 percent increase in April. Consumer prices less food and energy rose 2.9 percent from May 2025, following a 2.8 percent year-over-year rise in April and matching the +2.9 percent expected in the Econoday survey.
Energy costs rose 3.9 percent, following a 3.8 percent jump in April boosted by a 7.8 percent spike in gasoline prices.
Energy prices are up 23.5 percent year-over-year, following a 17.9 percent increase for the 12 months ending April. Gasoline prices soared 40.5 percent last month compared to a year ago.
After a 0.6 percent increase in April, shelter costs picked up by 0.3 percent in May (and are up 3.4 percent year-over-year).
Food prices were up 0.2 percent, after a 0.5 percent increase in April. Grocery prices increased by 0.1 percent on a monthly basis in May and are +2.7 percent compared to a year ago, and restaurant prices rose 0.3 percent and surged 3.5 percent compared to May 2025.
Food prices overall increased by 3.1 percent compared to May 2025, following a 3.2 percent rise in April.
Market Consensus Before Announcement
CPI seen up 0.5 percent on the month and 4.2 percent on year as energy prices lift the total. Core CPI expected at 0.3 percent and 2.9 percent, respectively. Lots of components expected to show the impact of higher energy costs including food, housing, fertilizer, chemicals, metals, and more.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
