Inflation tops 4% for the first time in 3 years on spike in gasoline prices

Energy costs accounted for more than 60% of the monthly rise in the consumer price index in May. Joe Raedle/Getty Images North America hide caption

Soaring gasoline prices, triggered by the U.S. war with Iran, have pushed inflation to its highest level in more than three years.

A report from the Labor Department Wednesday showed consumer prices in May were up 4.2% from a year ago. That's the biggest annual increase since April of 2023.

Prices rose 0.5% between April and May, with higher energy costs accounting for more than 60% of that monthly increase. Gas prices have jumped by well over a dollar a gallon since the war began, strangling shipping traffic in the Strait of Hormuz — a critical pathway for much of the world's oil supply.

Higher fuel costs also pushed up air fares in May. Airline tickets cost about 27% more than they did a year ago.

Grocery prices showed little change during the month, rising just 0.1%. Stripping out volatile food and energy prices, "core inflation" was 2.9% for the 12 months ending in May, a slightly larger annual increase than the previous month.

Stubborn inflation makes it less likely the Federal Reserve will cut interest rates any time soon, especially since the U.S. job market appears to be stabilizing . Employers added 172,000 jobs last month.

Gasoline prices have eased in recent days, amid hopes of a possible negotiated settlement between the U.S. and Iran. But pump prices at $4.15 a gallon are still about $1.17 higher than they were before the war began, according to AAA.