The Federal Reserve's preferred inflation gauge just hit a three-year high at 4.1%, proving what every American filling a gas tank or walking down a grocery aisle already knew: the central bank's inflation victory was always a lie.
For more than five years, inflation has stayed above the Fed's own 2% target, and the latest numbers show it's getting worse, not better. Gas prices, semiconductor costs, and financial services fees are all climbing — and now markets are betting the Fed will hike rates again, which means more pain for borrowers, small businesses, and anyone without a stock portfolio to cushion the blow.
The personal consumption expenditures price index rose 4.1% in May from a year earlier, the Commerce Department reported Thursday — the largest annual jump since April 2023. Month over month, prices climbed 0.4%. Core inflation, stripping out food and energy, hit 3.4% annually.
Gasoline was the biggest culprit, rising 6.5% in May alone after a 20.9% spike in March, according to Breitbart. The Guardian notes gas prices hit nearly $4.50 a gallon on average last month before falling to $3.92 after President Trump agreed to a peace deal with Iran — still more than 20% above where they sat a year ago.
But it's not just the pump. The Guardian reports that semiconductor and computer equipment prices are climbing thanks to the AI buildout. Breitbart notes financial services and insurance prices jumped 1.2%, reflecting stock market gains — meaning Wall Street's wins are literally being priced into the cost of doing business for everyone else.
New Fed Chair Kevin Warsh last week reiterated the central bank's commitment to its 2% target but gave no signal of next steps. The market is making its own bets: Benzinga reports money markets now price a near-certain 25-basis-point rate hike by October, with a second increase expected by March 2027.
That's a full reversal from January, when the Fed penciled in two cuts. Some economists now expect rate increases instead, per the Guardian — a shift that hammered tech stocks this week.
Meanwhile, the establishment's story is that things are fine. Consumer spending rose 0.3% adjusted for inflation, and incomes picked up 0.3% after four months of stagnation. GDP was revised up to 2.1% annualized growth in the first quarter. But as Mark Vitner, chief economist at Piedmont Crescent Capital, told the Guardian, inflation hadn't topped 2.5% for nearly a decade before the pandemic. The spikes since then hit households that had built budgets around stable prices — budgets that don't bend so easily.
The Guardian framed the report as a "political problem" for Trump and Republicans ahead of midterms. Breitbart led with the gasoline numbers and hard data. Benzinga focused on what it means for rate-hike odds. What none of them dwell on is the simplest fact: five years above target, and the people who set monetary policy have no credibility left when they say they've got it under control.
The Fed has missed its own target for over five years running. At what point do Americans stop calling it a miss and start calling it policy?
