In May 2025, U.S. inflation rose by 0.1% from the previous month, bringing the annual inflation rate to 2.4%, slightly below economists’ predictions of 2.5%.
Core U.S. inflation, which excludes food and energy, increased by 0.1% month-on-month, with a year-on-year rate of 2.8%.
The modest rise was largely offset by falling energy prices, particularly a 2.6% drop in petrol, which helped keep overall inflation in check.
Prices for new and used vehicles, as well as apparel, also declined. Meanwhile, food and housing (shelter) costs each rose by 0.3%, with housing (shelter) being the primary contributor to the monthly increase.
Despite President Trump’s sweeping tariffs introduced in April 2025, their inflationary impact has yet to fully materialise. Analysts suggest that many companies are still working through pre-tariff inventories, delaying price hikes for consumers.
However, economists caution that the effects may become more pronounced in the coming months.
The Federal Reserve is expected to hold interest rates steady for now, as U.S. policymakers monitor whether inflation remains contained or begins to accelerate due to trade-related pressures.
Markets responded positively to the data, with stock futures rising and Treasury yields falling.
So, while inflation remains above the Fed’s 2% target, May’s figures suggest a temporary reprieve.
The summer could yet tell a different story.
