US inflation rises for the third straight month in May, increasing pressure on Fed and President Trump’s administration

US consumer price index increased 4.2% (y/y) in May from 3.8% previous month and in line with expectations, while core inflation, stripped for the most volatile components, rose 2.9% from 2.8% in April, as economists predicted.

Inflation extends its strong rise into third consecutive month, with May’s numbers reflecting the fastest pace of inflation increase and the largest monthly gain in three years, driven primarily by higher energy prices as the war in the Middle East shook energy market by slowing or cutting supply channels.

With inflation at more than double level of Fed’s 2% target, the central bank is expected to come under increased pressure.

Most of economists expect the central bank to keep interest rates unchanged until early 2027, while markets have fully priced 0.25% rate hike by the end of the year.

Elevated inflation is also to increase pressure on households, which already struggle to co-op with the situation, while inflation also outpaced wage growth for a second consecutive month, which could weigh on overall economic growth.

President Trump’s administration is expected to face the consequences from strong rise in cost of living, as one of Trump’s main campaign promises was to lower inflation, with current condition providing strong headwinds ahead of key mid-term election in November, in which Trump seeks to keep control of Congress.