U.S. Inflation Edges Up 2.4% in May as Grocery Costs Rise/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. inflation rose slightly in May, driven by higher grocery costs. The annual inflation rate reached 2.4%, with core prices holding at 2.8%, complicating potential Federal Reserve rate cuts. Trump’s escalating tariffs may increase prices further in the second half of 2025.
U.S. Inflation Trends: Grocery Prices Drive May Increase Quick Looks
- Consumer prices rose 2.4% in May compared to last year
- Core inflation steady at 2.8%, above the Fed’s 2% target
- Grocery prices increased 0.3%, with cereals and frozen foods rising
- Egg prices fell 2.7%, still up 40% over last year
- Trump’s new tariffs on Chinese imports raised to 55%
- Tariffs expected to push up costs for cars, groceries, household goods
- Airline fares and hotel rates dropped, easing pressure on service inflation
- Monthly inflation rose just 0.1%, signaling some moderation
- Labor Department trims inflation data collection, sparking concerns
- Fed likely to hold interest rates steady due to tariff uncertainty
Deep Look: May Inflation Inches Up, Driven by Food Costs and Tariff Fears
WASHINGTON — U.S. inflation ticked slightly higher in May, signaling persistent pricing pressure even as the Federal Reserve weighs its next move on interest rates. According to the Labor Department, consumer prices increased 2.4% over the past 12 months, up modestly from 2.3% in April.
At the core of the price increase: rising grocery costs. Prices at the supermarket climbed 0.3% month-over-month, with notable spikes in frozen foods, breakfast cereals, and fresh produce. Despite a 2.7% drop in egg prices, they remain over 40% more expensive than a year ago.
Excluding volatile food and energy prices, core inflation remained at 2.8% for the third consecutive month. This gauge is closely monitored by the Federal Reserve as it provides a clearer picture of underlying inflation trends.
Fed Rate Cuts on Hold as Inflation Persists
The inflation figures show continued resistance in bringing price growth down to the Fed’s target of 2%. While headline inflation has eased since its 2022-2023 highs, core prices remain elevated. For nearly a year, core inflation fluctuated between 3.2% and 3.4%, only falling to the current 2.8% in February and remaining there since.
This persistence is one reason Federal Reserve Chair Jerome Powell and other central bank officials have signaled a reluctance to cut interest rates anytime soon. The Fed’s current strategy is to wait and observe how new economic pressures — especially those tied to Trump’s trade policy — play out.
Tariffs Loom Over Economic Forecasts
President Donald Trump’s renewed tariff strategy is injecting additional uncertainty into inflation forecasts. Last week, Trump announced that the U.S. would increase tariffs on Chinese goods to 55%, up from 30%, as part of an aggressive new trade posture. Additionally, a 10% baseline tariff on all global imports and 50% duties on steel and aluminum are now in effect.
These moves are expected to raise prices for a wide range of goods, from groceries to automobiles and electronics, particularly in the second half of the year. Some economists already see early signals in May’s price report, although the overall monthly inflation gain slowed to 0.1% from April’s 0.2%.
“There’s a lot of latent inflation that hasn’t yet shown up in the numbers,” said one market analyst. “Once those tariffs feed through supply chains, we could see more pronounced effects.”
Concerns Over Reduced Data Transparency
In a potentially complicating development, the Bureau of Labor Statistics (BLS) recently announced it would reduce the scope of inflation data collected. While officials downplayed the impact, many economists expressed concern that less granular data could increase volatility in reported figures or mask key inflation trends.
The BLS has not disclosed the extent of the data reduction, but independent analysts believe it will have limited but noticeable effects on monthly inflation accuracy, especially in localized categories like rent, medical services, or food.
Sector-by-Sector Breakdown
- Groceries: +0.3% month-over-month, +2.2% year-over-year
- Eggs: -2.7% (second straight monthly decline, but still expensive)
- Clothing: Prices fell, despite broader import tariffs
- Travel: Airfares and hotel rates dropped, offering consumer relief
- Cars: Prices steady for now, but expected to rise with tariffs
- Utilities and energy: Stable to slightly lower due to seasonal factors
Looking Ahead: What Will the Fed Do?
With inflation still above target and Trump’s tariffs expected to push prices higher, the Fed has made it clear that no rate cuts are imminent. Central bank officials are likely to maintain current borrowing costs while analyzing the economic ripple effects of ongoing trade battles.
Trump, meanwhile, has continued to press the Fed to lower interest rates, arguing that higher borrowing costs are slowing growth. But with inflation proving sticky and tariff-driven pressures looming, the Fed is expected to remain cautious.
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