The Bureau of Labor Statistics released the May CPI on Wednesday, showing overall inflation rising 4.2% year‑over‑year – the third consecutive month of acceleration. Core CPI, which excludes food and energy, edged up 0.2% in May, or 2.9% from a year earlier. The data arrive ahead of Fed Chair Kevin Warsh’s first policy meeting, sharpening expectations that rates will stay significantly unchanged.

Policymakers blame the February‑onset war in Iran for elevated energy costs, which have pushed food and transportation prices higher. A New York Fed survey shows consumers still expect inflation above target through the end of 2026, while the labor market shows no signs of weakening, leaving firms free to pass cost hikes onto buyers. Broader price spreads would tighten policy further.

Bond markets reflected the Fed’s stance, with futures showing no cut in the coming months and pricing a 25‑basis‑point hike for December. With price pressures persisting and no clear labour slowdown, officials have turned hostile to rate reductions and even floated the prospect of further tightening to hit the 2% target. The Fed will likely keep policy restrictive through year‑end.