The May Consumer Price Index was largely in line with expectations, with headline inflation rising 0.5% month-over-month and core CPI up 0.2%, one-tenth below forecasts. But inflation remains the economy's major pain point, regardless of who ultimately absorbs the costs, notes Peter Boockvar, editor of The Boock Report.
Year-over-year, headline CPI increased 4.2% while core CPI rose 2.9%, both slightly above April's readings. Energy was again a key driver, with prices rising 3.9% in May, led by a 7% jump in gasoline prices. Electricity costs climbed 0.6% during the month and are now up 5.9% YOY. Food prices rose a modest 0.2%, though prices for food away from home continue to outpace grocery inflation.
(Editor’s Note: Peter is speaking at the 2026 MoneyShow/TradersEXPO Orlando, scheduled for Oct. 5-7. Click HERE to register.)
CPI (YOY % Change)
Source: Bureau of Labor Statistics
Services inflation excluding energy increased 0.3% MOM and 3.4% YOY, with shelter costs remaining the biggest contributor. Owners' Equivalent Rent rose 0.3%, while Rent of Primary Residence gained 0.4%. Medical care prices also rebounded after two months of declines.
One statistical distortion remains health insurance, where the Bureau of Labor Statistics reports prices down 6.4% YOY. Rather than measuring actual premiums, the calculation is largely based on insurer profit margins, making it disconnected from consumers' real-world experience.
As for markets, the federal funds futures market is pricing in a 96% chance of one rate hike by year end – but we know so much depends on hearing where new Federal Reserve Chair Kevin Warsh stands. While we all debate on what he wants to do, I think for the first time since Volcker, we’re going to see more internal dissents in the coming years.
