U.S. inflation rises 0.4% in May on stronger gas prices

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, official inflation was unchanged — 0.0%.

The gasoline index increased sharply in May, rising 10.4% and accounting for most of overall increase. But gasoline prices are still down 25% over the last 12 months. Food prices were unchanged in May, the BLS said, and apparel prices were down 0.5%.

Core inflation – stripping out food and energy – was up 0.1% in May and 1.7% over the last 12 months. This indicates inflation has not yet reached a level (above 2.0%) that would prompt the Federal Reserve to begin raising short-term interest rates.

Holders of TIPS and I Bonds are also interested in non-seasonally adjusted inflation, which is used to determine principal adjustments on TIPS and future interest rates for I Bonds. May’s inflation index was set at 237.805, up 0.51% from April, but essentially unchanged from where it stood in May 2014 — 237.900.

I have updated my Tracking Inflation and I Bonds page to reflect these new numbers. It’s important to note that while I Bonds currently have a negative inflation-adjusted rate through Oct. 31 (-1.60% annualized) that number looks likely to rise into the positive when the new rate sets Nov. 1. Inflation is up 0.71% in the last two months.

top MayHere is the inflation trend over the last 12 months, showing that inflation is definitely rising after months of deflation in late 2014 and early 2015:

inflation

 

 

 

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