Inflation Jumps in May as Consumer Sentiment Climbs

The Bureau of Labor Statistics reported that the Consumer Price Index rose 4.2% year-over-year in May and 0.5% from April. Energy, shelter and food were the largest contributors to the monthly gain, with energy accounting for more than 60% of the increase. Core CPI, which excludes food and energy, was up 2.9% year-over-year and 0.2% from April.

Wholesale inflation accelerated in May, the Bureau of Labor Statistics said, with the Producer Price Index rising 6.5% year-over-year and 1.1% on the month, above forecasts. Monthly increases were concentrated in energy and food. Core PPI, excluding those categories, rose 0.4% for the month and 4.9% from a year earlier.

The University of Michigan’s preliminary Consumer Sentiment Index for June climbed to 48.4, about a 9% increase from May. The preliminary report showed broad-based improvement across age, income, education and political groups. One-year inflation expectations fell to 4.6%, and five-year expectations eased to 3.5%.

Financial markets responded modestly to the data. The S&P 500 posted a weekly gain of about 0.6%, and equal-weighted indices outperformed, rising roughly 1.9% for the week. Benchmark Treasury yields finished the week with the 10-year around 4.48% and the 2-year near 4.09%.

The CME FedWatch Tool indicated a high probability-about 96%—that the Federal Reserve will hold interest rates steady at its upcoming meeting. Market pricing showed little chance of an immediate rate cut and implied a possible 25 basis-point increase by late 2026.

Economic releases scheduled for the week of June 15 include regional manufacturing surveys, May industrial production, housing starts and building permits, May retail sales and pending home sales, the Federal Reserve interest rate decision midweek, weekly jobless claims and a Philadelphia Fed manufacturing index. These reports will provide additional data on inflation, production and the labor market.

May’s inflation readings and the June preliminary sentiment update were published by the Bureau of Labor Statistics and the University of Michigan, respectively.