U.S. Inflation Rises 2.4% in May Amid Muted Tariff Effects

In May 2025, U.S. inflation rose modestly with the Consumer Price Index (CPI) increasing 0.1% month-over-month and 2.4% year-over-year, slightly above April's 2.3% annual rise but below many economists' expectations. Core inflation, which excludes volatile food and energy prices, held steady at 2.8% annually and rose 0.1% monthly, both figures lower than forecasted, suggesting muted effects from President Trump's tariff policies so far. Despite tariffs on imported goods, prices for items like new cars and clothing fell in May, indicating companies may be absorbing costs or utilizing existing inventories rather than passing increases on to consumers. Rising housing costs contributed most to inflationary pressure, while decreases in energy prices helped offset some increases. Economists caution that tariffs could exert upward price pressure in the coming months, potentially influencing Federal Reserve policy decisions, though the Fed is currently expected to hold interest rates steady at its next meeting. Overall, the data point to a cooling inflation environment with tariff impacts not yet broadly translating into higher consumer prices.