Consumer inflation vaults above 4% as Iran war boosts energy prices

U.S. consumer inflation jumped to 4.2% in May, boosted by energy prices amid the Middle East conflict, reinforcing the case for keeping rates higher for longer into 2027. The Labor Department reported the CPI rose 4.2% year over year and 0.5% for May, the third straight monthly gain. Energy prices drove the advance, with gasoline up 7.0% in May and 40.5% higher than a year earlier, while energy goods rose 3.9% and accounted for most of the monthly increase. Real average hourly earnings fell 0.7% year over year, underscoring the squeeze on households as inflation persists.