CNN
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Inflation rose less than expected in May, a month when the effects of higher tariffs were starting to become more widespread.
Consumer prices rose 0.1% last month, while the annual inflation rate increased to 2.4% from a four-year-low of 2.3% notched in April, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics.
The better-than-expected inflation reading is welcome news for Americans worn down by the higher cost of living and who are fearful of whether tariffs will drive that higher. However, while the tariff impacts weren’t prevalent in Wednesday’s report, the latest CPI was lightly pockmarked with potential indications of price hikes and weaker consumer demand.
May’s overall inflation readings came in better than expected. Economists had projected that falling gas prices would keep the overall monthly inflation rate in check while year-ago comparisons became less favorable.
Forecasts called for a 0.2% monthly rise and for the CPI to increase 2.5% on an annual basis, according to FactSet.
Stock futures jumped higher after the data release, but at the opening bell the Dow ticked down by around 40 points, or 0.1%. The S&P 500 rose 0.08% and the Nasdaq Composite gained 0.25%.
For now, a closely watched measurement of underlying inflation is holding steady.
The core CPI, which excludes the highly volatile categories of food and energy, rose just 0.1% from April and held pat at 2.8%.
Economists have anticipated that price pressures would continue to build as businesses try to adapt to President Donald Trump’s sharp escalation in the US tariff rate and unpredictable trade policy.
However, they’ve also cautioned that it may take some time before higher tariff rates result in pricier items for consumers and, ultimately, higher inflation rates.
“Today’s below-forecast inflation print is reassuring — but only to an extent,” Seema Shah, chief global strategist at Principal Asset Management, wrote Wednesday. “Tariff-driven price increases may not feed through to the CPI data for a few more months yet, so it is far too premature to assume that the price shock will not materialize.”
It might not be until late summer before the data starts to reflect the tariff impacts, she said.
Among the key reasons for that: Economic data is lagged; there have been significant shifts in tariff policy, and some of the most aggressive duties were curtailed, paused or lessened; businesses front-loaded purchases, building up their pre-tariff inventory and offering up discounts to keep from alienating customers; and some costs from the initial waves of new tariffs might have been absorbed by retailers and manufacturers.
This story is developing and will be updated.
