The Federal Reserve’s preferred inflation gauge rose to a new three-year high in May, driven by higher gas prices and increased costs for computer equipment due to the AI buildout. The Commerce Department reported that consumer prices rose 4.1% from a year earlier, the largest annual increase since April 2023. On a monthly basis, inflation was 0.4% last month, matching April's increase and down from 0.7% in March. This rise poses political challenges for President Trump as midterm elections near.
Key Takeaways
The Federal Reserve’s preferred inflation gauge rose to its highest level in three years in May due to increased gas prices and higher costs for computer equipment driven by AI demand. Consumer prices surged 4.1% annually, the largest increase since April 2023, while monthly inflation held steady at 0.4%. The rise poses political challenges for President Trump as midterm elections approach.
- Federal Reserve’s preferred gauge hits three-year high in May
- Annual consumer price increase of 4.1%, highest since April 2023
- Monthly inflation remains stable at 0.4%
- Rising gas prices and AI-driven semiconductor costs drive inflation
- Fed keeps key rate unchanged, reversing earlier plans for cuts
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▼Source Claims Check
High ConsensusAll 4 publishers report consistent facts across 4 key claims.
| Claim | Status | Reason | |
|---|---|---|---|
| Annual Inflation Rate | Broad Agreement | 4.1% annual increase in May | |
| Monthly Inflation Rate | Broad Agreement | 0.4% monthly increase in May | |
| Core Prices Annual Change | Broad Agreement | 3.4% annual increase in May | |
| Current Gas Price | Broad Agreement | $3.92 per gallon as of Thursday |
Annual Inflation Rate
Broad Agreement4.1% annual increase in May
Monthly Inflation Rate
Broad Agreement0.4% monthly increase in May
Core Prices Annual Change
Broad Agreement3.4% annual increase in May
Current Gas Price
Broad Agreement$3.92 per gallon as of Thursday
This analysis is AI-generated and may not perfectly represent each source's reporting. Always read the original articles for full context.
The increase was largely driven by more expensive gas, as well as pricier semiconductors and other computer equipment that are in high demand for the AI buildout. Rising prices have caused the Federal Reserve to keep its key rate unchanged this year, a reversal from January when they had penciled in two cuts. Some economists now forecast that the central bank could lift rates instead.
New Fed chair Kevin Warsh last week underscored the central bank's determination to drive inflation back to its 2% target, but he gave no sign of what steps the Fed might take. Oil and gas prices have fallen substantially since Trump agreed to a peace deal with Iran, but the conflict lifted gas prices to nearly $4.50 a gallon on average nationwide last month. They have since fallen back to $3.92 as of Thursday, according to AAA.
Excluding the volatile energy and food categories, core prices rose 3.4% in May compared with a year earlier, up from 3.3% in April and the largest increase since October 2023. On a monthly basis, they rose 0.3% from April to May, the same as the previous month.
The report also showed that consumer spending rose at a solid pace, with adjusted for inflation spending increasing by 0.3% from April to May. Incomes, adjusted for inflation, rose for the first time in four months, picking up 0.3%, which could bolster consumer spending in coming months.
Inflation has been above the Fed’s 2% target for more than five years, leaving many Americans more gloomy about the future. The report covers the personal consumption expenditures price index, a lesser-known measure compared to the consumer price index, which was released earlier this month and showed a similarly large increase.
How this summary was created
This summary synthesizes reporting from 4 independent publishers using AI. All sources are cited and linked below. NewsBalance is a news aggregator and media literacy tool, not a news publisher. AI-generated content may contain errors or inaccuracies — always verify important information with the original sources.