Consumer prices rose by 0.1% in May, showing a cooling path not expected by most economists. According to the latest Consumer Price Index report from the Bureau of Labor Statistics, the annual inflation rate just rose to 2.4%. This increase comes after a four-year low reached in April. This unexpected stability in inflation comes despite ongoing concerns regarding the impact of higher tariff rates imposed by the Trump administration.
Most economists expected that declining gas prices would be enough to bring down the overall monthly inflation rate. Their predictions were spot on. Fuel costs have recently decreased, offering some relief from inflationary pressures created by the large tariff increases. Consequently, the headline monthly reading undershot the consensus forecast. This complicated advancement is indicative of the times, as conditions grow more complicated economically with every passing year-ago comparison getting less rosy.
Just as many were predicting inflation to increase significantly in May due to increased tariffs. Much to our surprise, that was indeed not the case. Consumers are just beginning to feel the broader impacts of the tariff hikes. The intense inflationary pressure we all feared hasn’t materialized to the degree we expected. It seems that companies are still reeling from President Trump’s reckless tariff blitzkrieg and whimsical trade policies.
As economists had predicted, inflation forces would become even hotter in May because of these outside influences. The Consumer Price Index data show that the overall inflation readings were better than expected. This casts considerable doubt on how resilient consumer spending actually is. It leads us to ask, do tariffs really lead to big price increases in multiple affected sectors?
Even with the surprise halt to inflation progress, experts aren’t ready to breathe easy just yet. They hope to see further adaptations from industry as tariffs continue to change. This structural change will tend to fuel rising price pressures going forward. May’s inflation figures provided a momentary respite. Beneath the surface, economic conditions are suggesting that inflation will tick back up in some of the next few months.