A sharp rise in fuel costs pushed US inflation to its fastest annual pace in three years in May, according to data published on Wednesday, strengthening the case for the Federal Reserve to keep borrowing costs higher for longer.
Consumer prices rose 4.2% in May from a year earlier, the Labour Department said, up from 3.8% in April and marking a third consecutive increase. On a monthly basis, prices climbed 0.5%, following gains of 0.6% in April and 0.9% in March.
Beyond the impact of higher energy costs, underlying price pressures remained more moderate, suggesting inflation has yet to spread broadly across the economy. If energy prices continue to ease, headline inflation could begin to cool in the coming months. Gasoline prices have already fallen since May.
One encouraging sign in Wednesday's report was that core inflation — which excludes the volatile food and energy categories — remained relatively subdued. Core prices rose 0.2% in May, down from a 0.4% increase in April. Compared with a year earlier, core inflation edged up to 2.9% from 2.8%.
Nevertheless, many goods and services became more expensive last month. Clothing prices rose 0.3% and were 4.8% higher than a year earlier. Airline fares, driven higher by rising jet fuel costs, increased 2.7% in May alone and were nearly 27% above their level a year ago. Electricity prices rose 0.6% during the month and were up 5.9% annually.
