Inflation rises to a 3-year high on spiking gas prices, highlighting affordability challenges

By — Christopher Rugaber, Associated Press Christopher Rugaber, Associated Press Leave your feedback Share Copy URL https://www.pbs.org/newshour/economy/inflation-rises-to-a-3-year-high-on-spiking-gas-prices-highlighting-affordability-challenges Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Inflation rises to a 3-year high on spiking gas prices, highlighting affordability challenges Economy Jun 10, 2026 10:27 AM EDT WASHINGTON (AP) — Rising gas prices pushed inflation to its highest level in three years last month, a headache for the Federal Reserve and a potential political challenge for the Trump administration as midterm elections near. Consumer prices rose 4.2% in May from a year earlier, the Labor Department said Wednesday, up from 3.8% in April and the third straight increase. On a monthly basis, prices rose 0.5% last month, after big gains of 0.6% in April and 0.9% in March. READ MORE: Trump faces a new inflation warning from the bond market, adding to his midterm challenges Inflation had been cooling before President Donald Trump imposed sweeping tariffs in April 2025, which lifted the costs of many goods. Prices have since surged after the Iran war made oil and gas more expensive, making affordability a key political issue. A key question is whether rising prices will spread more broadly through the economy. Educate your inbox Subscribe to Here’s the Deal, our politics newsletter for analysis you won’t find anywhere else. Excluding the volatile food and energy categories, core prices rose 2.9% in March from a year earlier, up from 2.8% in April. On a monthly basis, core prices increased a modest 0.2%, down from a 0.4% gain in April. Gas prices have fallen this month, but they 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. READ MORE: Trump says Iran will 'pay the price' for stalled talks, as U.S. and Tehran trade fire They have since fallen back to $4.16 on average nationwide, according to AAA, which could lead to a cooler inflation reading in June. More expensive diesel fuel has lifted shipping costs, with companies like UPS and FedEx adding fuel surcharges in the past couple of months. That is likely to push up grocery prices, which jumped 0.7% in April and are 2.9% higher than a year ago. Stubbornly high inflation has shifted the debate among Fed policymakers, who had signaled at the start of the year that they were inclined to cut their key rate twice more this year. Now, more officials are saying they expect the Fed's next move will likely be a hike rather than a cut. When the Fed boosts its key rate, it typically over time leads to higher borrowing costs for mortgages, auto loans, and business loans. Wall Street investors expect the Fed to raise rates in December, according to futu