Inflation hits 3-year high, squeezing Trump ahead of midterms

inflation hits – Consumer prices rose 4.2% in May year over year, pushing inflation to a three-year high and reviving pressure on the Federal Reserve to keep rates higher. For President Donald Trump and Republicans heading toward midterm elections, the affordability squeeze is

Gas pumps may be dropping a little, but the math for many Americans is still brutal.

Consumer prices rose 4.2% in May from a year earlier. the Labor Department reported Wednesday—up from 3.8% in April and the third straight monthly increase. On a monthly basis, prices increased 0.5% last month, after rising 0.6% in April and 0.9% in March. Inflation is now well above the Federal Reserve’s 2% target and has exceeded it for more than five years.

For families, the pressure isn’t abstract. The report described how prices are rising faster than wages for several months. squeezing household finances and prompting consumers to take a dim view of the economy. Families are dipping into savings to maintain spending, and more people are falling behind on their credit card bills. Large retailers say they’ve also noticed changes in behavior at checkout—such as buying smaller amounts of gas during visits to the pump.

The new data lands at a tense moment for the Fed and for the Trump administration. New Fed chair Kevin Warsh will preside over his first policy meeting next week. when the central bank is expected to keep its key interest rate unchanged. But the Fed is also likely to change the statement it issues after each meeting. removing a suggestion that its next move could be to lower rates. With inflation proving stubborn, financial markets expect the Fed could raise rates by the end of the year.

That matters because when the Fed lifts rates, over time it can make mortgages, auto loans, and business borrowing more expensive—costs that ripple into household budgets and hiring plans.

Even as outside energy costs eased somewhat. the report said price increases in May were not as dramatic beyond the energy categories. suggesting sharply higher inflation hasn’t yet spread throughout the economy. The report added that if the Iran war ends and oil and gas prices decline. headline inflation could begin to cool. Gas prices have fallen this month, though they remain elevated.

Core prices—excluding the volatile food and energy categories—rose at a more modest pace. They climbed 0.2% on a monthly basis in May, down from a 0.4% gain in April. Compared with a year ago, core prices rose 2.9%, up from 2.8% in April.

President Donald Trump praised the inflation report in comments to reporters Wednesday. saying. “the numbers were great” and “I love it.” He argued the data was positive because it showed energy prices were a huge driver of rising costs; the government said energy accounted for more than 60% of the monthly increase. Trump also suggested inflation would ease “as soon as this war is over.”.

But the same day Trump made those remarks, the U.S. launched more airstrikes against Iran, and Trump said more were coming after Tehran fired back at countries in the region. Crude prices shot back above $90 a barrel during the exchange.

Still, many everyday categories rose in May. Clothing costs increased 0.3% and were 4.8% higher than a year ago. Airline fares jumped 2.7% in May, pushed higher by pricier jet fuel, and were nearly 27% higher than a year ago. Electricity prices rose 0.6% in May and were up 5.9% over the past year.

Grocery prices were tamer in May compared with previous months, rising just 0.1% from April. Yet groceries were still up 2.7% from a year ago and have risen sharply since the pandemic.

Omair Sharif. chief economist at Inflation Insights. said. “I don’t think we’re anywhere near out of the woods yet.” He added that price increases “were stronger under the hood.” Sharif and other economists pointed to services costs—such as child care. home health care. and dental services—rising more quickly than is consistent with the Fed’s 2% inflation target.

Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, attributed part of the gain to a crackdown on immigration, saying it has likely forced many employers in those industries to raise wages.

Inflation had been cooling before Trump imposed sweeping tariffs in April 2025, which lifted the costs of many goods. After the Iran war made oil and gas more expensive, the report said prices surged again—turning affordability into a central political issue.

Small businesses are feeling the strain directly. Some are passing higher costs on to customers through higher prices, while others have slowed hiring or cut jobs.

Beth Benike. founder of Oronoco. Minnesota-based Busy Baby. said her small company was hit hard by tariffs last year and is now struggling with higher shipping costs driven by more expensive fuel. Busy Baby sells silicon placemats and toys that attach to high chairs and strollers. Benike said sales declined as inflation worsened, and she recently reduced one full-time employee to part-time hours. She also said more customers are now grandparents of newborns rather than the parents themselves.

“Grandparents have a little more disposable income than the generation that’s having babies,” Benike said.

In the background, gas prices reflect the world oil market’s instability. The report said gas prices rose in May because of Iran’s closure of the Strait of Hormuz. which has choked off about a fifth of the world’s oil supply. Prices at the pump rose on average from about $4.04 in mid-April to $4.49 in mid-May, according to the Energy Information Administration.

Since then, prices have fallen back to $4.16 on average nationwide, according to AAA. That could lead to a cooler inflation reading in June, the report noted—but it doesn’t erase the psychological weight of fuel costs. The report said a gallon of gas has hovered above $4 a gallon since March.

Retailers have responded by discounting. Dollar General is expanding the number of items that cost $1 or less. including frozen food. and the report said some shoppers are shifting to dollar stores. Dollar General CEO Todd Vasos said this month. “When that (gas) price hits that $4 mark and then crosses it and then sustains for a while. you start to see that trade-in come in and you start to see that our core customer needs us most.”.

In Utah and much of the west, the impact is also showing up in charitable giving. Amber Greenwell. executive director of the America First Credit Union’s charitable foundation. based in Ogden. Utah. said the cost of gas. housing. and groceries have risen sharply in the state and across the region over the past year. Her organization organizes food and diaper drives in the six states where the credit union operates.

“There is substantial growth in families who need more food resources as well as diaper resources,” Greenwell said.

The inflation numbers are reshaping the debate inside the Federal Reserve as well. At the start of the year, policymakers signaled they were inclined to cut their key rate twice more. Now, more officials are saying the next move will likely be a hike rather than a cut.

Despite higher inflation, the job market appears to be improving. Hiring increased to a healthy level in May. and the economy is still growing. signs that suggest the Fed may not need to cut rates to stimulate growth and hiring. Those signals also suggest the Fed’s rate isn’t so high that it is weighing on the economy. At the same time, some officials want rates to cool growth a bit, because that can help bring down inflation.

For millions of Americans, this is happening in real time—at the gas pump, in grocery aisles, and in the monthly bills that determine whether savings last or credit card balances keep mounting.

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