United States: Inflation Continues to Accelerate

The rise in the cost of living continues to gain momentum in the United States. Once again in May, energy prices made a significant contribution to the increase in total CPI. Gasoline prices posted an even stronger gain in May (a monthly increase of +7.0%) than in April (+5.4%), although this remains relatively modest compared with the March surge (+21.2%). On a year-over-year basis, gasoline prices are up 40.5%. While geopolitical tensions involving Iran and the Strait of Hormuz remain highly volatile, recent developments in June suggest easing pressures. At the beginning of this week, pump prices were 8.4% lower than in mid-May. As such, energy prices could begin to exert a negative contribution to monthly CPI growth as early as this month.

Other developments are also more encouraging. Food prices showed less pronounced growth in May than in April, particularly at grocery stores. Meat prices recorded a rare decline. A moderation in food prices would be particularly welcome for US households. It is still too early to determine whether the few reported cases of screwworm in Texas livestock could eventually put upward pressure on meat prices.

Excluding food and energy, conditions appear to be normalizing, with monthly growth of 0.2%, in line with the average observed over the six months preceding April’s acceleration. Notably, May marked the first monthly decline in goods prices (excluding food and energy) since May 2025. This decrease was supported by a significant drop in pharmaceutical prices and a decline in new motor vehicle prices. On the services side (excluding energy), prices rose by 0.3%, down from 0.5% in April. Moderation was observed in both shelter and motor vehicle insurance. However, on a year-over-year basis, prices for services excluding energy and shelter reached their highest rate since February 2025.

US inflation dynamics remain closely tied to geopolitical developments in the Middle East. Barring a renewed surge in oil and gasoline prices, total inflation may have reached its peak in May, although upside risks persist. For now, our forecasts suggest that year-over-year total CPI inflation will fall back below 4% as early as June. In this context, and with core inflation expected to remain relatively stable, the new Chair of the Federal Reserve, Kevin Warsh, and his colleagues are likely to keep policy rates unchanged at next week’s meeting.