Finance
Here’s the inflation breakdown for May 2025 — in one chart
David Paul Morris/Bloomberg via Getty Images
The annual inflation rate increased slightly in May as an uptick in grocery inflation somewhat offset lower prices at the gasoline pump.
And while inflation was relatively tame, economists said they expect President Trump’s tariff policy to raise consumer prices in coming months — and that there was already some evidence of their impact.
The consumer price index, an inflation barometer, rose 2.4% in the 12 months through May, up from 2.3% in April, the Bureau of Labor Statistics said Wednesday.
‘Calm before the inflation storm’
That increase to the annual inflation rate was largely due to a data quirk called “base effects,” economists said. (Basically, inflation one year prior, in May 2024, was unusually low, making the May 2025 numbers look high by comparison.)
The monthly inflation rate paints a rosier picture and gives a better indicator of underlying trends, economists said: CPI increased 0.1% from April to May, down from 0.2% the prior month, the BLS said.
A consistent monthly rate around 0.2% would generally be adequate to bring inflation down to the Federal Reserve’s long-term target, economists said.
“It was a very good report,” said Mark Zandi, chief economist at Moody’s. “Basically, it says inflation has finally gotten back to the Federal Reserve’s annual inflation target.”
However, tariffs President Trump levied on many countries and products will likely start to show up noticeably into the summer and fall, he said.
“I think it’s the calm before the inflation storm,” Zandi said. “This [report] still reflects the disinflation that began a few years ago and continued on through the month of May.”
Tariff impact on energy prices
That said, tariffs already had some impact on consumer prices in May, economists said.
For one, gasoline prices fell almost 3% from April to May, according to the BLS. They’re down 12% from a year ago, it said.
This is largely the result of falling oil prices, which reflect concerns about a slowdown in global economic growth due to tariffs, said Bernard Yaros, lead U.S. economist at Oxford Economics.
Lower energy prices filter down to the gasoline pump and lower household bills, he said. Lower oil prices also feed through more broadly to reduced costs for transportation, in categories like airline fares, Zandi said.
Airfare fell about 3% from April to May and is down 7% for the year, the BLS said.
Grocery prices were a sticking point in May, though, economists said. Inflation for food at home rose by 0.3% for the month, after having deflated 0.4% the prior month.
Food prices give “a little bit of a queasy feeling,” Zandi said. It’s one of the categories he’s most concerned about, he said.
Other disinflationary factors
Healing supply chains and a weakening of the labor market are factors that have helped rein in U.S. inflation broadly, said Sarah House, a senior economist at Wells Fargo Economics.
Data indicate consumers are continuing to spend money and haven’t shown much reluctance to accept higher prices, House said.
“The consumer hasn’t buckled yet,” she said.
Housing inflation has also moderated, an important element since the category is the largest component of the consumer price index, economists said.
Indeed, monthly inflation for rent and “owners’ equivalent rent” (a rent measure applied to homeowners) have “returned to their pre-pandemic norms,” Stephen Brown, deputy chief North America economist at Capital Economics, wrote in a research note Wednesday.
These trends together signaled “a steady downtrend in inflation” back to the Fed’s long-term target at least by the end of this year or early next year, Oxford Economics’ Yaros said.
Tariff risk ‘stalling out’ disinflation
Tariffs complicate that narrative, economists said.
“The disinflationary trend we’ve been seeing in fits and starts is at risk of stalling out again,” House said.
President Trump has levied a barrage of import duties since his inauguration in January.
Federal data show the effective tariff rate in April was about 6% — and is likely to increase — relative to 2% at end of 2024, House said.
The Yale Budget Lab estimates the average U.S. household would pay about $2,500 more in 2025 due to tariff policy in effect as of June 1.
There were some early signs of tariff impacts in the May CPI report for people “looking through a microscope,” Brown wrote.
For example, major appliance prices jumped 4.3% for the month, and toy prices by 2.2%, he wrote, citing CPI data.
“Unless all retailers are raising prices at the same time, it may trickle not flood into the data,” Elizabeth Renter, senior economist at NerdWallet, wrote Wednesday.
A Gamestop store is seen in Union Square on April 4, 2025 in New York City.
Michael M. Santiago | Getty Images
GameStop shares slid on Thursday after the video game retailer and meme stock announced plans for a $1.75 billion convertible notes offering to potentially fund its new bitcoin purchase strategy.
The company said it intends to use the net proceeds from the offering for general corporate purposes, “including making investments in a manner consistent with GameStop’s Investment Policy and potential acquisitions.”
Part of the investment policy is to add cryptocurrencies on its balance sheet. Last month, GameStop bought 4,710 bitcoins, worth more than half a billion dollars.
The stock tanked more than 15% in premarket trading following the announcement.
GameStop
GameStop is following in the footsteps of software company MicroStrategy, now known as Strategy, which bought billions of dollars worth of bitcoin in recent years to become the largest corporate holder of the flagship cryptocurrency. That decision prompted a rapid, albeit volatile, rise for Strategy’s stock.
Strategy has issued various forms of securities including convertible debt to fund its bitcoin purchases.
CEO Ryan Cohen recently said GameStop’s decision to buy bitcoin is driven by macro concerns as the digital coin, with its fixed supply and decentralized nature, could serve as protection against certain risks.
The brick-and-mortar retailer reported a decline in fiscal first-quarter revenue on Tuesday as demand for online gaming rose. Its revenue dropped 17% year-over-year to $732.4 million.
The shares fell 6% on Wednesday after those results. Wall Street appears uncertain it can mimic the success of MicroStrategy.
Wedbush analyst Michael Pachter reiterated his underperform rating on GameStop Wednesday, saying the meme stock has consistently capitalized on “greater fools” willing to pay more than twice its asset value for its shares. The Wedbush analyst believes the bitcoin buying strategy makes little sense as the company, already trading at 2.4 times cash, isn’t likely to drive an even greater premium by converting more cash to crypto.
ISSB standards adopted more widely across globe
IRS extends deadline on crypto broker reporting and withholding
What a Trump, Powell Fed showdown means for your money
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Economics6 days agoJobs report May 2025:
-
Economics1 week agoElon Musk’s failure in government
-
Economics6 days agoDonald Trump has many ways to hurt Elon Musk
-
Finance6 days agoStocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU
-
Economics6 days ago
Donald Trump has many ways to hurt Elon Musk
-
Economics4 days agoSending the National Guard to LA is not about stopping rioting
-
Blog Post5 days agoMastering Bookkeeping Tasks During Peak Business Seasons
-
Personal Finance4 days agoWhat Pell Grant changes in Trump budget, House tax bill mean for students