Inflation Surges To 4.2%, Highest Since April 2023: Wall Street Now Bets On A Fed Hike (UPDATED)

Editor’s note: This article was updated to add more details and context.
Price pressures intensified further in May as the Strait of Hormuz energy shock continued to feed through the Consumer Price Index basket, reinforcing the case for Federal Reserve’s interest rate hike in 2026.
The headline inflation rate climbed from 3.8% year-over-year in April to 4.2% in May, matching economist expectations. That is the hottest reading since April 2023 and pushing the measure further away from the Fed’s 2% target.
On a monthly basis, prices rose 0.5%, matching the 0.5% consensus after April’s 0.6% print.
Stripping out food and energy, core inflation rose from 2.8% to 2.9%, also matching forecasts. Underlying month-over-month pressures rose 0.2%, decelerating from the prior 0.4% against a 0.3% consen