Analysis: US inflation returns to "4-handle" in May, war-related inflation peak may have passed (Jin10 Data APP)

Odaily reported that US consumer prices rose at the fastest pace in three years in May, as the Middle East conflict pushed up prices for gasoline and other energy products, providing further justification for the Federal Reserve to keep interest rates unchanged until 2027.

Data released on Wednesday showed that in the 12 months through May, the CPI rose 4.2% year-on-year, the largest increase since April 2023. On a monthly basis, prices rose 0.5% from the previous month, following a 0.6% increase in April. The third consecutive sharp monthly increase in CPI highlights the growing strain on households, as there are signs that more consumers are dipping into savings to cover expenses.

Additionally, inflation has outpaced wage growth for the second consecutive month, which could negatively impact overall economic growth. Meanwhile, the sharp rise in the cost of living poses a significant political burden for President Trump and his party, who are attempting to retain control of Congress in the November midterm elections.

John Briggs, Head of US Rates Strategy for North America at Natixis, said that the month-on-month core inflation reading was slightly more moderate than expected, which may help solidify the argument that the peak of war-related inflation may have passed and the inflation outlook could improve in the future. Of course, this depends on oil prices remaining stable going forward. (Jin10)