STORY: :: Analyst says energy costs are driving US inflation higher, led to 'dreary report'

:: June 10, 2026

:: Stephen Kates, Bankrate financial analyst

"The main story here: headline inflation is up 4.2% on an annual basis. That's the highest we've seen in three years, since May of 2023. Most of that move is due to energy prices, gasoline prices in particular, from the conflict in the Middle East. // CUT

"Food at home or grocery prices, you know, was surprisingly tame. Which is good. Now, food overall is still rising at above the Fed's target inflation rate. Food away from home, restaurants, you know, that's still rising, you know, higher than we'd like to see, but that is a bit of a bright spot. Not overwhelmingly so, but a bit of a bright spot, you know, in an otherwise pretty dreary report."

"So, for Kevin Warsh, this is a very tough time to be coming in as a new Fed chair. I don't envy him at all. I think the conditions that we had in the beginning of the year, when, you know, he was nominated, is - they're gone. It's an entirely different world today. And so he's coming in as a Fed chair now who has a rapidly increasing rate of inflation, also a job market that seems to be improving. And so the balance of risks has shifted from, you know, trying to sort of ensure the economy is going to keep running to now a concern whether it's overheating, whether inflation rates are rising too fast and that consumers are expecting them to keep rising."

The third straight month of strong increases in the Consumer Price Index reported by the Labor Department on Wednesday (June 10) underscored the mounting pressure on households, who are increasingly tapping their savings to fund spending.

Inflation outpaced wage growth for a second consecutive month, which could weigh on overall economic growth. The soaring cost of living is a political liability for President Donald Trump and his Republican Party, seeking to retain control of Congress in the midterm elections in November. Trump won the 2024 presidential election in large part because of his promise to lower inflation, but has seen his approval rating tumble as frustration mounts over his handling of the economy.

The Consumer Price Index increased 4.2% in the 12 months through May, the largest gain since April 2023, the Labor Department's Bureau of Labor Statistics said. The CPI advanced 3.8% year-on-year in April. Prices increased 0.5% over the month after climbing 0.6% in April. The rise in inflation was in line with economists' expectations.

The U.S. central bank tracks the Personal Consumption Expenditures Price Indexes for its 2% inflation target. All inflation measures are running well above the Fed's target.