May’s consumer price index report, due Wednesday morning from the Bureau of Labor Statistics at 8:30 a.m. ET, is set to deliver another uncomfortable milestone for American consumers.
Wall Street consensus points to the CPI showing inflation running at a 4.2% annual rate, driven by an expected 0.5% monthly gain in May.
That reading would mark the first time the CPI has crossed the 4% threshold since May 2023, and would represent the highest reading since April of that year.
Just twelve months ago, the headline inflation figure stood at 2.4%, making the current trajectory a sharp and painful reversal for households across the country.
Much of the acceleration in the headline number is being attributed to surging energy costs resulting from the Iran war, which has sent oil prices climbing sharply.
Even core prices, which strip out volatile food and energy components, are projected to post a 2.9% annual reading after rising 0.3% in May, according to Dow Jones.
Concerns are mounting that the inflationary surge is no longer confined to energy, with rising oil prices beginning to filter through more broadly into the wider economy.
“It’s not just an oil story, it’s a money supply story, and it’s increasingly an AI story,” said Liz Ann Sonders, chief investment strategist at Charles Schwab, adding, “So this is a broader inflation problem than just energy, meaning that we probably still have somewhat sticky inflation.”
Sonders warned that investor anxiety is closely tied to inflation expectations, saying “a lot of this skittishness” from markets means “something worse than expected probably doesn’t sit well with the equity market.”
The Trump administration has argued that inflation will subside quickly once hostilities in the Middle East come to an end, pointing to energy as the primary driver of elevated prices.
However, Sonders cautioned against relying on that outcome, noting the lasting damage already inflicted on supply infrastructure across the region.
“Even if there would be a quick resolution to the war, you probably wouldn’t see oil prices come down to prior lows, because there’s been so much disruption to production,” she said, warning, “That’s not something that a switch can just be turned back on.”
Annual headline inflation came in at 3.8% in April, while the core rate stood at 2.8%, underscoring the pace at which price pressures have accelerated heading into the summer.