{"slug": "key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability", "title": "Key inflation gauge jumps to 3-year high in latest sign of affordability challenges", "summary": "The Federal Reserve's preferred inflation gauge rose to a 4.1% annual rate in May, a three-year high, driven by surging gas prices and semiconductor costs. The increase poses political challenges for President Trump ahead of midterm elections and may force the Fed to raise interest rates this year.", "body_md": "# Key inflation gauge jumps to 3-year high in latest sign of affordability challenges\n\n## The Federal Reserve’s preferred inflation gauge rose to a new three-year high in May as gas prices peaked, a sign rising costs could pose political problems for President Trump as midterm elections near\n\n- Bookmark\n\nThe Federal Reserve’s preferred inflation gauge rose to a new three-year high in May as gas prices peaked, a sign rising costs could pose political problems for President [Trump](/topic/trump) as midterm elections near.\n\nThe [Commerce Department](/topic/commerce-department) said Thursday that consumer prices rose 4.1% in May from a year earlier, the largest annual increase since April 2023. On a monthly basis, inflation was 0.4% last month, matching April’s increase and down from 0.7% in March.\n\nThe increase was largely driven by more expensive gas, as well as pricier semiconductors and other computer equipment that are in high demand for the AI buildout. Rising prices have caused the inflation-fighters at the [Federal Reserve](/topic/federal-reserve) to keep their key rate unchanged this year, a reversal from January when they had penciled in two cuts. Some economists forecast the central bank could lift rates this year instead.\n\nNew Fed chair Kevin Warsh last week underscored the central bank’s determination to drive inflation back to its 2% target, but he gave no sign of what steps the Fed might take. Some economists, however, now expect the central bank to increase rates this year. Those expectations have helped drive down share prices this week.\n\nOil and gas prices have fallen substantially since Trump agreed to a peace deal with [Iran](/topic/iran), but the conflict lifted gas prices to nearly $4.50 a gallon on average nationwide last month. They have since fallen back to $3.92 as of Thursday, according to [AAA](/topic/aaa).\n\nExcluding the volatile energy and food categories, core prices rose 3.4% in May compared with a year earlier, up from 3.3% in April and the largest increase since October 2023. On a monthly basis, they rose 0.3% from April to May, the same as the previous month.", "url": "https://wpnews.pro/news/key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability", "canonical_source": "https://www.independent.co.uk/news/trump-washington-federal-reserve-commerce-department-aaa-b3002955.html", "published_at": "2026-06-25 12:43:20+00:00", "updated_at": "2026-06-25 12:53:32.368510+00:00", "lang": "en", "topics": ["ai-chips", "ai-infrastructure"], "entities": ["Federal Reserve", "Commerce Department", "President Trump", "Kevin Warsh", "Iran", "AAA"], "alternates": {"html": "https://wpnews.pro/news/key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability", "markdown": "https://wpnews.pro/news/key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability.md", "text": "https://wpnews.pro/news/key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability.txt", "jsonld": "https://wpnews.pro/news/key-inflation-gauge-jumps-to-3-year-high-in-latest-sign-of-affordability.jsonld"}}