Wall Street is bracing for a sharp inflation reading Wednesday morning as the Bureau of Labor Statistics releases its May consumer price index report at 8:30 a.m. ET.
The Dow Jones consensus projects the CPI will show inflation running at a 4.2% annual rate, driven by an expected 0.5% monthly gain in May.
That reading would mark the first time the CPI has surpassed 4% since May 2023 and would represent the highest inflation print since April of that year.
Just one year ago, the headline inflation figure stood at 2.4%, underscoring how dramatically price pressures have accelerated in recent months.
Much of the surge in the headline number has been attributed to the energy spike resulting from the Iran war, which has driven oil prices sharply higher.
Core prices, which strip out volatile food and energy components, are projected to post a 2.9% annual reading after rising 0.3% in May, according to Dow Jones.
Annual headline inflation came in at 3.8% in April, while the core rate stood at 2.8%, meaning both measures are expected to climb further in Wednesday’s report.
Liz Ann Sonders, chief investment strategist at Charles Schwab, warned that the inflation problem extends well beyond energy prices alone.
“It’s not just an oil story, it’s a money supply story, and it’s increasingly an AI story,” Sonders said. “So this is a broader inflation problem than just energy, meaning that we probably still have somewhat sticky inflation.”
Sonders also cautioned that investor anxiety is increasingly centered on inflation data, warning that “something worse than expected probably doesn’t sit well with the equity market.”
The Trump administration has argued that inflation will recede quickly once the fighting in the Middle East settles down and energy markets stabilize.
However, Sonders pushed back on that view, arguing that significant supply disruptions make a rapid price reversal unlikely even after any ceasefire.
“Even if there would be a quick resolution to the war, you probably wouldn’t see oil prices come down to prior lows, because there’s been so much disruption to production,” she said. “That’s not something that a switch can just be turned back on.”
Concerns are growing among investors and economists that the inflation burst is broadening well beyond energy, raising fears that price pressures could prove more persistent than policymakers have anticipated.
