Trump says 'I love inflation' as US CPI hits 4.2%, the fastest pace since 2023, driven by Iran war energy costs

The inflation numbers

The US Consumer Price Index increased 4.2% in the 12 months through May, the Labor Department's Bureau of Labor Statistics reported on Wednesday. That was the largest gain since April 2023 and matched the consensus forecast from economists polled by Reuters. The CPI had advanced 3.8% year-on-year in April. On a monthly basis, prices rose 0.5% after climbing 0.6% in April.

Core CPI, which excludes volatile food and energy components, increased 2.9% year-on-year in May, up from 2.8% in April. The monthly core reading was 0.2%, down from 0.4% in April. All inflation measures remain well above the Federal Reserve's 2% target, giving the central bank more reason to keep interest rates unchanged into 2027.

Energy prices drive the surge

The acceleration is tied directly to the US-Israeli military campaign against Iran that began on 28 February. Tehran retaliated by blocking hydrocarbon traffic through the Strait of Hormuz, a chokepoint that normally carries about one-fifth of the world's oil. Energy prices as a category rose 23.5% over the year before. Gasoline prices jumped 40.5% year-on-year, though the national average dipped to $4.15 a gallon on Wednesday according to AAA, down from a peak above $4.60 earlier in the spring. Diesel averaged $5.30 a gallon, up 41% since the war began.

The CPI had been declining through late 2025 and stabilised around 2.4% in early 2026 before taking off in March. Wages rose 3.4% over the same period, meaning inflation outpaced pay gains for a second consecutive month. Airfares climbed 26.7% year-on-year, vehicle maintenance rose 6.1%, and hospital services increased 5.7%.

Trump's 'I love inflation' moment

Asked by reporters whether he was concerned about the data, President Trump said from the Oval Office: "The numbers were great … I love inflation." He added that inflation would "fall like a stone" once the conflict ends. The remarks drew sharp reactions.

Trump really said 'I love inflation.' On camera. For all Americans to hear. His contempt for you has no limit.

You know who doesn't love inflation, Mr. President? Working families struggling to pay for gas, groceries and other essentials because of your disastrous actions.

House Speaker Mike Johnson, a Republican, said the president's words had been "taken out of context." Trump had campaigned in 2024 on a promise to end inflation, and his approval rating has fallen as frustration over his handling of the economy has grown.

Military escalation and the Strait of Hormuz

For a second consecutive night, the US military struck targets across Iran, this time reaching close to Tehran with what Trump described as 49 missiles plus fighter-jet strikes. Iran's Revolutionary Guard responded with attacks on US positions in Bahrain, Kuwait and Jordan. The New York Times reported that the two countries risk sliding back into full-scale war, straining a two-month ceasefire.

Iran said it had tightened its blockade of the Strait of Hormuz further, closing it to "all types of tankers." US Central Command denied the strait was closed. The Financial Times reported that a growing number of ships are escaping the corridor via a risky "dark" route close to the Omani coastline, with about fifteen vessels per day, mostly oil tankers, making the passage under US air cover. Trump referenced the effort, saying the US had managed to get "millions of barrels of oil" through the strait without Iran's knowledge.

Market reaction

Oil prices rose on Wednesday after Trump threatened Iran again on social media and told reporters he planned to attack again. Brent crude, the global benchmark, rose about 3% to roughly $94 a barrel before easing slightly. West Texas Intermediate was up about 3% to around $91 a barrel. On Thursday, after the second night of strikes, Brent rose nearly 2% to about $95 a barrel and WTI reached around $92.

Equity markets fell. The S&P 500 dropped 1.6% on Wednesday. In Asia, South Korea's Kospi declined 4.5%, Taiwan's Taiex dropped 3.3%, and Japan's Nikkei 225 closed 1.9% lower. The Stoxx 600 in Europe was flat. Deutsche Bank analysts described the week as "genuinely topsy-turvy … with oil and tech whipsawing" markets.

Political and economic outlook

The rising cost of living is a political liability for Trump and his Republican Party ahead of the November midterm elections, where they seek to retain control of both chambers of Congress. If Democrats recapture one or both houses, they would limit Trump's ability to advance his legislative agenda.

Several analysts said inflation may have peaked. Kathy Bostjancic of Nationwide wrote that inflation "should slow in the second half, provided a deal is reached quickly with Iran to reopen the Strait of Hormuz." The recent retreat in gasoline prices from their wartime highs has left some economists cautiously hopeful that May could mark the top for the CPI.