U.S. Inflation Slows in May as Energy Prices Fall, but Food and Rent Costs Stay High

The pace of inflation in the United States slowed in May, providing a modest sign of relief for policymakers and consumers.

But even as overall prices eased, costs for food and housing — two of the most essential household expenses — continued to climb, highlighting the uneven nature of the recovery from the most volatile inflation cycle in four decades.

The Consumer Price Index, a closely watched measure of the cost of goods and services, rose 0.1 percent in May compared to the previous month, the Labor Department reported Tuesday. Over the past year, prices increased 2.4 percent, a slight uptick from April’s 2.3 percent annual rate.

Stripping out volatile food and energy prices, the core CPI rose 0.1 percent in May and 2.8 percent over the past 12 months — a level that remains well above the Federal Reserve’s preferred target of 2 percent.

“The data tells us inflation is cooling,” said Diane Jacobs, chief economist at Axis Research. “But consumers don’t necessarily feel that when rent and groceries are still moving in the opposite direction.”

Prices for Shelter and Food Continue to Climb

Housing remained one of the most stubborn drivers of inflation. The shelter index — which includes rent and owners’ equivalent rent — increased 0.3 percent in May, marking the fourth consecutive monthly increase. On an annual basis, shelter costs are up 3.9 percent.

Food prices, too, remained elevated. The cost of groceries and meals rose 0.3 percent last month and 2.9 percent compared to May 2024. Analysts pointed to higher prices for dairy, bread, and takeout meals.

For many American families, those increases have a tangible impact.

“We’ve cut back on eating out, and even grocery shopping feels tighter,” said Sheryl Hampton, a mother of two in Des Moines. “Rent’s gone up twice this year already. It’s a lot.”

Energy Offers Some Relief

Gasoline prices dipped in May, helping to moderate overall inflation. The energy index fell 1 percent, and energy prices are down 3.5 percent compared to last year, thanks in part to stable crude oil markets and improved refining output.

That relief, however, was not enough to offset the broader cost pressures consumers face each month.

A Complicated Picture for the Fed

The Federal Reserve is expected to leave interest rates unchanged at its upcoming meeting, as officials continue to assess whether the current level of inflation justifies a shift in monetary policy.

Fed Chair Jerome H. Powell has signaled that while progress has been made in slowing inflation, the central bank remains cautious about declaring victory too soon.

“We need to see more sustained evidence that inflation is truly returning to our target,” Powell said during a recent conference in Chicago.

Investors, meanwhile, are scaling back their expectations for interest rate cuts this summer. Futures markets now indicate the Fed is unlikely to begin easing rates until the fall — if at all — amid lingering concerns about wage growth and global trade uncertainty.

The Path Ahead

While inflation has fallen sharply from its 9.1 percent peak in June 2022, economists warn that further progress could be slower and more uneven. Housing affordability remains a key concern, and any new disruptions — such as rising tariffs or supply chain bottlenecks — could add fresh pressure to prices.

For now, consumers remain caught in the middle.

“I know the headlines say inflation is slowing,” said Hampton, the Des Moines resident. “But it doesn’t feel like it at the checkout line.”

CPI Snapshot – May 2025