Gasoline prices are doing what they do best: making everything more expensive. After April’s Consumer Price Index came in at 3.8% year-over-year, up from 3.3% the month before, projections for May suggest the number could climb to 4.2%, which would mark the fastest pace of inflation since April 2023.
The culprit is energy. Gasoline prices surged 5.4% month-over-month in April, translating to a staggering 28.4% increase on a year-over-year basis. The broader energy index rose 17.9% year-over-year, a figure that makes the Fed’s job considerably harder and investors considerably more nervous.
The gasoline problem won’t stay at the pump
Geopolitical tensions, particularly involving Iran, have been the primary catalyst for elevated energy prices. Those tensions have shown little sign of cooling, which means the inflationary pressure from gasoline isn’t a one-month blip.
The April CPI reading of 3.8% was already uncomfortable enough to shift market expectations around Federal Reserve policy. A May print of 4.2% would make the case for interest rate cuts even harder to argue. Moving from 3.3% to a projected 4.2% in just two months isn’t a gradual anything. It’s acceleration in the wrong direction.
