By Alicia Wallace, CNN
(CNN) — Inflation, as measured by the Consumer Price Index, is expected to run above 4% for the first time in three years because of the Iran war’s oil price shock.
Fast-rising gas prices are expected in May to once again have an outsized effect on overall inflation, pushing up prices at a similar pace as that seen in 2021 and 2022, when inflation was headed for a four-decade high of 9.1%.
Economists expect that inflation rose 0.5% in May and 4.2% from a year ago, according to FactSet estimates. That would put the three-month average at just under 0.7%, the fastest since the April to June 2022 period (when it was 0.8%).
That’s an unsettling throwback; however, economists say that this bout of inflation isn’t expected to be as bad as the last one – current projections have CPI topping out in the range of 4.5% to 5% this year.
However, price levels are another matter. The latest inflation shock is adding another layer of fast-rising prices: Common goods and services are significantly more expensive than they were before the pandemic.
Affordability pressures are building, and Americans are having a harder time keeping up.
Fast-rising prices are already outstripping Americans’ paychecks, and that gap is widening. If CPI rises 4.2% in May, it will mean that real (inflation-adjusted) wages are declining at an annual rate of 0.8%.
The ripple effects from the war-driven energy price shock could become even more evident in May’s data, although it’s expected to be a slow boil: Categories such as airfares, transportation, food and apparel could see further increases.
In April, prices of fruits and vegetables, which are often transported by refrigerated diesel trucks, rose by 2.3%, the highest monthly increase for that category since 2010. Tomato prices have risen by more than 15% for two months in a row.
Outside of food and energy, price hikes are expected to be more muted. Economists are expecting that “core” inflation rose by 0.3% in May and that the annual rate ticked up to 2.9% from 2.8% the month before.
This story will be updated when the Bureau of Labor Statistics releases its CPI report for May at 8:30 a.m. ET.
The-CNN-Wire™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
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