Inflation rose slightly in May, offset by cheaper gas and travel fares

Walmart warns of price hikes due to tariffs

"Always low prices" has long been a selling point for Walmart stores across the country. However, recent tariff announcements from the Trump administration have the company admitting their prices might have to change, at least for a little while.

U.S. inflation rose slightly last month, with the rising cost of groceries, games and appliances offset by lower prices on cars, clothes and travel expenses.

The latest figures suggest that tariffs haven’t impacted prices yet, but economists say that could change in coming months.

May inflation report

By the numbers:

Consumer prices increased 2.4% in May compared with a year ago, according to a Labor Department report released Wednesday. That is up from a 2.3% yearly increase in April. Excluding the volatile food and energy categories, core prices rose 2.8% for the third straight month. Economists pay close attention to core prices because they generally provide a better sense of where inflation is headed.

On a monthly basis, overall prices ticked up just 0.1% from April to May, down from 0.2% the previous month, with inflationary pressures appearing muted. Core prices also dropped to 0.1% from 0.2%.

Customers self-check out at a supermarket in Manhattan on May 13, 2025 in New York City.(Photo by Liao Pan/China News Service/VCG via Getty Images)

Grocery prices rose 0.3% from April to May, and are up 2.2% in the past year. Fruits and vegetables, breakfast cereals, and frozen foods all rose last month. Egg costs fell 2.7%, though they are still more than 40% more expensive than a year ago. Gas prices dropped 2.6% last month.

Did tariffs impact inflation?

Dig deeper:

The data showed that Trump's tariffs haven't yet pushed overall prices higher, suggesting many companies may be absorbing the cost of the higher duties for now. Yet many economists expect the import taxes to modestly increase inflation in the second half of the year. Companies ranging from Walmart to Lululemon to J.M. Smucker have said they will raise prices in the coming months to offset the impact of tariffs.

What they're saying:

"You can point to seeing tariffs in this report, but the more important message is that you’re seeing inflation soften enough elsewhere that overall, price pressures continue to subside for the U.S. consumer," Sarah House, an economist at Wells Fargo, told The Associated Press.

But offsetting price drops for things like cars and air fares may not continue at the same pace for the rest of this year, she said.

"I don’t think this report signals an all clear -- that tariffs are not going to be a concern for the inflation picture," House said.

Inflation still above Fed’s target

Big picture view:

The figures also show that core inflation remains stubbornly above the Federal Reserve’s 2% target, which makes it less likely that the central bank will cut its key short-term interest rate. Trump has repeatedly urged the central bank to reduce borrowing costs.

The other side:

Nearly all economists expect Trump's duties will make many things more expensive this year, including cars and groceries, though by how much is still uncertain. Trump said Wednesday the U.S. will place 55% tariffs on all imports from China, up from the previous level of 30%. He has also imposed a 10% baseline tariff on imported goods from every other country, and 50% import taxes on steel and aluminum.

The Source: This report includes information from The Associated Press.

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