U.S. inflation tops 4%, but tumbling oil prices to bring price relief soon

By Jeffry Bartash

Worst inflation in three years may have peaked

Inflation has bothered Americans since the end of the pandemic.

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The main inflation barometer used to set U.S. interest rates rose topped 4% in May for the first time in three years - but price relief might be finally on the way for weary consumers.

The personal-consumption price index rose by 0.X% last month, the government said Thursday, a tick below the Wall Street forecast.

The yearly rate of inflation climbed to 4.1% from 3.8% in the prior month and just 2.3% one year earlier.

The latest bout of inflation was sparked by the war with Iran and a resulting surge in oil prices to $113 a barrel. Yet with peace talks ongoing, oil prices have tumbled under $70, not far from pre-conflict levels of $65 a barrel.

The decline in oil prices should slow the inflation rate in the coming months, starting with the June report. It could also ease pressure on the Federal Reserve to raise interest rates to contain inflation.

A Fed rate cut, however, still seems quite distant. The rate of inflation would probably have to decelerate to under 3%, but it might not reach that goal before year end.

A separate measure of inflation that strips out energy, meanwhile, rose 0.3% in May.

The increase in the so-called core rate in the 12 months ended in May moved up to 3.4% from 3.3% in the prior month. That's the highest level since the fall of 2023.

The Fed views the PCE index as the most accurate barometer of U.S. inflation trends.

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to increase in Thursday trading.

-Jeffry Bartash

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06-25-26 0837ET