U.S. May CPI rises 4.2% year-on-year, hitting a three-year high; core CPI accelerates to 2.9%.

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U.S. inflation has heated up again under the impact of rising energy prices, but core indicators measuring underlying inflation pressure remain moderate, leaving room for interpretation regarding the Federal Reserve's monetary policy direction.

Data released by the U.S. Bureau of Labor Statistics on Wednesday show that the Consumer Price Index (CPI) rose by 4.2% year-on-year in May, the highest level since early 2023, in line with market expectations and noticeably faster than the previous figure of 3.8%. The main factor driving overall inflation higher was the increase in energy prices triggered by the Iran war. The month-on-month increase was 0.5%, matching expectations and slightly lower than the previous value of 0.6%.

As for core CPI, it rose 2.9% year-on-year in May, in line with expectations and slightly higher than the previous value of 2.8%. The month-on-month increase was 0.2%, lower than the market expectation of 0.3% and a significant slowdown from the previous value of 0.4%. The moderate month-on-month performance of core CPI means that potential inflation pressure, excluding energy and food, has eased, a signal with important implications for the market.

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