Inflation ticked slightly higher in May – and while the overall picture still looks calm, experts warn the real impact of tariffs could be just around the corner.
According to the Bureau of Labor Statistics, consumer prices rose 2.4% in the 12 months through May, compared to 2.3% the month before. So what’s behind the increase?
It’s not what you think.
That bump is largely due to what economists call a “base effect.” In plain terms, inflation was unusually low in May 2024 – so this year’s data looks artificially high by comparison.
When you look at the month-over-month data, the story is more reassuring: inflation rose just 0.1% from April to May, down from 0.2% the month prior.
“It was a very good report,” said Mark Zandi, chief economist at Moody’s. “Basically, it says inflation has finally gotten back to the Federal Reserve’s annual inflation target.”
Don’t celebrate just yet
While the numbers suggest stability, economists are already eyeing the next storm: tariffs.
President Trump’s latest round of tariffs on a wide range of goods and countries is expected to push prices higher later this year. And we’re already starting to see some of those effects.
“I think it’s the calm before the inflation storm,” Zandi warned. “This [report] still reflects the disinflation that began a few years ago and continued on through the month of May.”
Here’s what’s getting cheaper — and what’s not
Let’s start with the good news: gas prices dropped nearly 3% from April to May and are down 12% compared to a year ago. That’s thanks to falling oil prices, driven by concerns over global economic slowdown — partly due to those same tariffs.
Lower energy costs help households across the board, reducing everything from gas bills to airline fares. In fact, airfare fell 3% in May and is down 7% year-over-year.
But not everything’s getting cheaper. Grocery prices are starting to climb.
After dropping 0.4% in April, food-at-home prices rose 0.3% in May — and that’s raising some red flags.
“Food prices give a little bit of a queasy feeling,” Zandi said. “It’s one of the categories I’m most concerned about.”
The bottom line?
Inflation may look tame for now, but economists say we’re not out of the woods. Tariffs could drive prices higher this summer and fall — and your grocery bill might be one of the first places you feel it.
Source: https://www.cnbc.com/2025/06/11/heres-the-inflation-breakdown-for-may-2025-in-one-chart.html
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