US consumer prices rise moderately; tariffs expected to fan inflation

US consumer prices increased less than expected in May as cheaper gasoline partially offset higher rents, but inflation is expected to accelerate in the coming months on the back of the Trump administration's import tariffs.

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The report from the Labor department on Wednesday also showed underlying price pressures muted last month. Economists say inflation has been slow to respond to President Donald J. Trump's sweeping tariffs as most retailers are still selling merchandise accumulated before the import duties took effect.

Walmart last month said it would start raising prices in late May and June. Inflation was also being curbed by slower price rises for services, including subdued airline fares. The US Federal Reserve is expected to keep interest rates unchanged next Wednesday, with financial markets optimistic of a resumption in monetary policy easing in September.

"This report is another indicator that, before tariffs and economic uncertainty, we were well on our way to inflation falling back to target and that the main impediment to future progress is tariff-related price increases," said Daniel Hornung, a senior fellow at MIT.

The consumer price index (CPI) increased 0.1% last month after rising 0.2% in April, the Labor department's Bureau of Labor Statistics (BLS) said. Economists polled by Reuters had forecast the CPI climbing 0.2%.

A 0.3% increase in the cost of shelter, mostly rents, was the main driver of the rise in the CPI. Food prices rebounded 0.3% after dipping 0.1% in April. Grocery store prices climbed 0.3%, lifted by strong increases for cereals and bakery products as well as other food consumed at home.

Fruit and vegetable prices also rose, but consumers got some relief from a 2.7% decline in the cost of eggs. Meat, fish, nonalcoholic beverages and dairy products also cost less relative to April. Gasoline prices dropped 2.6%.

In the 12 months through May, the CPI advanced 2.4% after gaining 2.3% in April.