{"id":2834,"date":"2026-06-25T18:36:43","date_gmt":"2026-06-25T18:36:43","guid":{"rendered":"https:\/\/denvermovingchronicle.com\/?p=2834"},"modified":"2026-06-25T18:36:43","modified_gmt":"2026-06-25T18:36:43","slug":"key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability-challenges","status":"publish","type":"post","link":"https:\/\/denvermovingchronicle.com\/?p=2834","title":{"rendered":"Key inflation gauge jumps to 3-year high in latest sign of affordability challenges"},"content":{"rendered":"
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WASHINGTON<\/strong> | The Federal Reserve\u2019s preferred inflation gauge rose to a new three-year high in May as gas prices peaked, a sign rising costs could pose political problems for President Donald Trump and his political party as midterm elections near.<\/p>\n

Consumer prices rose 4.1% in May from a year earlier, the Commerce Department said Thursday, the largest annual increase since April 2023. On a monthly basis, inflation was 0.4% last month, matching April\u2019s increase and down from 0.7% in March.<\/p>\n

The increase was largely driven by more expensive gas, as well as pricier semiconductors and other computer equipment that are in high demand for the AI buildout. Rising prices have caused the inflation-fighters at the Federal Reserve to keep their key rate unchanged this year, a reversal from January when they had penciled in two cuts. Some economists forecast the central bank could lift rates this year instead.<\/p>\n

<\/div>\n

\u201cUnderyling inflation is closer to 3% rather than 2%,\u201d said Mark Vitner, chief economist at Piedmont Crescent Capital. \u201cIt does suggest to me that the next Fed move, whenever it comes, is more likely to be a hike than a cut.\u201d The Fed probably won\u2019t raise rates until next year, he added.<\/p>\n

Oil and gas prices have fallen substantially since Trump agreed to a peace deal with Iran earlier this month, but the conflict lifted gas prices to nearly $4.50 a gallon on average nationwide in May. They have since fallen back to $3.92 as of Thursday, according to AAA, but that\u2019s more than 20% above prices at this time last year as the driving season gets underway.<\/p>\n

Declining gas prices will likely pull down headline inflation next month, yet measures of underlying inflation remain stubbornly elevated and will be a concern for the Fed. Excluding the volatile energy and food categories, core prices rose 3.4% in May compared with a year earlier, up from 3.3% in April and the largest increase since October 2023. On a monthly basis, they rose 0.3% from April to May, the same as the previous month.<\/p>\n

Higher gas prices aren\u2019t the only thing worsening inflation. The AI buildout has made computer components more expensive, and Apple announced last week that it would raise prices for its computers and iPads because of the higher costs. Services prices also rose sharply last month, lifted by more expensive restaurant meals, hotel rooms, auto repairs, and health care.<\/p>\n

At the same time, consumers appear willing to keep spending and boost the economy. Adjusted for inflation, spending rose 0.3% from April to May. And inflation-adjusted incomes rose for the first time in four months, picking up 0.3%, which could bolster consumer spending in coming months.<\/p>\n

A separate report Thursday showed that the economy expanded at a 2.1% annual rate in the first three months of the year, an upgrade from a previous estimate of 1.6%. And the number of people seeking unemployment benefits fell last week, a sign that layoffs remain low.<\/p>\n

New Fed chair Kevin Warsh last week underscored the central bank\u2019s determination to drive inflation back to its 2% target, but he gave no sign of what steps the Fed might take. Some economists, however, now expect the central bank to increase rates this year. Those expectations upended U.S. markets this week, hammering fast-growing sectors like tech.<\/p>\n

Inflation has been above the Fed\u2019s 2% target for more than five years, leaving many Americans more gloomy about the future. Vitner points out that inflation hadn\u2019t topped 2.5% for nearly a decade before the pandemic, likely making the inflation spikes since then even harder to accept for most households.<\/p>\n

Thursday\u2019s report covers the personal consumption expenditures price index, a lesser-known measure compared to the consumer price index, which was released earlier this month and showed a similarly large increase. The Fed prefers the PCE index because it puts less weight on housing and also reflects changes in how Americans shop when prices rise, such as when consumers buy cheaper off-brand items.<\/p>\n

The new inflation data arrives a day after Trump refused to sign housing legislation, approved by Congress, that is intended to spur more construction and lower home prices over time, a response to Americans\u2019 concerns about rising costs.<\/p>\n

Trump responded to the CPI report earlier this month by saying he \u201cloved the inflation.\u201d He has previously dismissed Democrats\u2019 focus on \u201caffordability\u201d as a \u201choax.\u201d<\/p>\n

Inflation jumped to 9.1% under former President Joe Biden, but even as it fell back closer to 2% in 2024, voters remained angry about the cumulative rise in the cost of groceries, rent, and other necessities.<\/p>\n

The PCE price index was last below 2.5% in April 2025, when Trump unveiled his \u201cLiberation Day\u201d tariffs. Inflation then climbed steadily to 2.9% just before the Iran war.<\/p>\n

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Read more Supreme Court ruling blocks thousands of lawsuits against maker of Roundup weedkiller<\/a><\/p>\n<\/p>\n<\/p>\n<\/p>\n<\/p>\n

Read more Supreme Court strikes down Hawaii law requiring permission to carry guns in stores and hotels<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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