US consumer inflation surged to a fresh three-year high in May, with soaring energy prices caused by US President Donald Trump’s Iran war posing a key challenge to Republicans ahead of midterm elections.<\/p>\n
The consumer price index (CPI) rose 4.2% year-on-year, up from April’s 3.8% figure, the US Bureau of Labor Statistics said today.<\/p>\n
It was the highest reading since April 2023, according to official data, but in line with analyst expectations.<\/p>\n
The US-Israel war against Iran, launched in late February, has sent energy prices skyrocketing after Tehran retaliated by virtually closing the vital Strait of Hormuz, through which roughly a fifth of global oil and gas normally pass.<\/p>\n
Trump has insisted that the price shock will be temporary and that a peace deal will be signed soon, but the soaring costs are a key issue for voters as they head to midterm elections in November.<\/p>\n
Trump’s Republican Party will be aiming to maintain their control of both houses of Congress, but will face a stiff test as high prices batter US households.<\/p>\n
Should Democratic lawmakers retake one or both houses, it will limit Trump’s ability to bulldoze policies through Congress as he has done throughout his second term.<\/p>\n
May’s consumer inflation data showed energy prices had risen 23.5% over the same time last year, with gasoline rising by 40.5%.<\/p>\n
Grocery prices also rose significantly for the second month in a row, up 2.7% over a year ago.<\/p>\n
Other prices to increase over the month included medical care, personal care, airline fares and recreation.<\/p>\n
Americans have been dealing with years of higher-than-expected prices, with inflation continuing to remain elevated long after the pandemic.<\/p>\n
Core CPI inflation, which excludes volatile food and energy prices, came in at 2.9% in May, up from 2.8% the month before.<\/p>\n
The US Federal Reserve has a long-term, 2% target for inflation, and the central bank’s key interest rate-setting committee will meet next week.<\/p>\n
Markets expect them to keep rates steady at this meeting, but are now pricing in rate hikes for later in the year, spooking equity investors.<\/p>\n
Before the war, markets had priced in interest rate cuts for later in the year, with expectations that inflation fueled by Trump’s tariff policy would begin to fade.<\/p>\n
The war, however, has complicated the outlook, with more Fed policymakers saying they were concerned about rising inflation, which the central bank would typically address by raising rates.<\/p>\n
The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) prices index, also hit a three-year high in its last reading.<\/p>\n
“The Fed will be in no position to cut rates if this continues,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.<\/p>\n
“The stock market has been climbing a wall of worry and has been able to rally on stronger earnings and stable interest rates, but a rising rate environment is another thing altogether,” he added.<\/p>\n","protected":false},"excerpt":{"rendered":"US consumer inflation surged to a fresh three-year high in May, with soaring energy prices caused by US…\n","protected":false},"author":2,"featured_media":492724,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":["post-492723","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/492723","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=492723"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/492723\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/492724"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=492723"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=492723"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=492723"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}