The Consumer Price Index is coming in hot, with nearly 8% annualized inflation over the past three months.

The May Consumer Price Index shows that overall inflation jumped 4.2% over the past year, driven by a 0.5% month-over-month increase. This is the highest headline inflation since May 2023. The annual rate was as low as 2.4% in February but has since exploded, primarily due to a 40% annual increase in gasoline prices.

The energy index accounted for over 60% of the monthly increase in May, contributing to a 7.96% annualized inflation rate over the past three months.

The core Consumer Price Index, which excludes food and energy, slowed to a comfortable 0.2% month-over-month increase in May. The annual inflation rate for core CPI tells a sneakier story, accelerating to 2.9%. Components like shelter and airfare remain stubbornly high.

This continues a steady climb from the 2.5% core inflation seen in February, proving that underlying inflation gained momentum in May even without the direct pressure of energy prices. The 2.9% core reading is the highest since September.

Services, communication, and travel are driving the annual core acceleration, rather than physical goods. If you're feeling budget pressure, audit your subscriptions, insurance policies, and cell phone plans right now. Negotiating better rates or cutting unnecessary outlays will help offset the creeping cost of sticky service inflation.