When asked by a reporter in the Oval Office if he was concerned about the inflation report that came out today, the president replied in the negative.
“I’m not concerned about the latest inflation numbers that came out this morning. I love it. I love the inflation,” he said.
He said the inflation data was good because it showed energy prices were a huge driver of rising costs — the government said they accounted for more than 60% of the monthly increase — and he suggested inflation would ease “as soon as this war is over.”
Consumer prices rose 4.2% in May from a year earlier, the Labor Department said Wednesday, up from 3.8% in April and the third straight monthly increase. On a monthly basis, prices rose 0.5% last month, after big gains of 0.6% in April and 0.9% in March.
When the Fed lifts rates, over time it can make mortgages, auto loans, and business borrowing more expensive.
Excluding the volatile food and energy categories, core prices rose at a more modest pace. On a monthly basis, they climbed just 0.2%, down from a 0.4% gain in April. Compared with a year ago, they have rise 2.9%, up from 2.8% in April.
Crude prices shot back above $90 a barrel on the violent exchange of fire.
Still, many goods and services rose in price last month: Clothing costs increased 0.3% and are 4.8% more expensive than a year ago. Airline fares, pushed higher by pricier jet fuel, jumped 2.7% just in May and are nearly 27% higher than a year ago. Electricity prices rose 0.6% in May and are up 5.9% in the past year.
Grocery prices were tamer in May compared with previous months, rising just 0.1% from April. Still, they are up 2.7% from a year ago and have risen sharply since the pandemic.
“I don’t think we’re anywhere near out of the woods yet,” Omair Sharif, chief economist at Inflation Insights, said. Price increases “were stronger under the hood.”
Sharif and other economists point out that the cost of services, including child care, home health care, and dental services are still rising much more quickly than is consistent with the Fed’s 2% inflation target.
Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, attributed some of the gain to a crackdown on immigration, which has likely forced many employers in those industries to raise wages.
Small businesses are struggling with higher costs, some of which they are passing on in the form of higher prices. Others have slowed hiring or even cut jobs.
Beth Benike, the founder of Oronoco, Minnesota-based Busy Baby, said her small company was hit hard by tariffs last year and is now struggling with higher shipping costs stemming from more expensive fuel. The company sells silicon placemats and toys that attach to high chairs and strollers.
Sales have declined as inflation has worsened, and Benike recently reduced one full-time employee to part-time hours. She said that more of her customers are now grandparents of newborns, rather than the parents.
“Grandparents have a little more disposable income than the generation that’s having babies,” she said.
Gas prices rose in May because of Iran’s closure of the Strait of Hormuz, which has choked off about a fifth of the world’s oil supply. Prices at the pump rose, on average, from about $4.04 in mid-April to $4.49 in mid-May, according to the Energy Information Administration.
They have since fallen back to $4.16 on average nationwide, according to AAA, which could lead to a cooler inflation reading in June. That doesn’t mean gas prices are not prominent in the minds of most Americans. A gallon of gas has hovered above $4 a gallon since March.
Major retail chains have discounted prices to accommodate customers who are watching their spending more closely.
“When that (gas) price hits that $4 mark and then crosses it and then sustains for a while, you start to see that trade-in come in and you start to see that our core customer needs us most,” Dollar General CEO Todd Vasos said this month.
Amber Greenwell, executive director of the America First Credit Union’s charitable foundation, based in Ogden, Utah, says the cost of gas, housing and groceries have risen sharply in her state and much of the west in the past year. Her organization organizes food and diaper drives in the six states where the credit union operates.
“There is substantial growth in families who need more food resources as well as diaper resources,” she said.
Stubbornly high inflation has shifted the debate among Fed policymakers, who had signaled at the start of the year that they were inclined to cut their key rate twice more this year. Now, more officials are saying they expect the Fed’s next move will likely be a hike rather than a cut.
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AP Writers Josh Boak and Anne D’Innocenzio contributed to this report. D’Innocenzio contributed from New York.
