Inflation has reached a 3-year high, with consumer prices jumping in May for the third straight month. The annual increase is up from the 3.8% reading in April, with prices rising a hefty 0.5% on a monthly basis.

Causes of Inflation

The main cause of the inflation spike is the Iran war, which has made oil and gas more expensive. Gas prices have fallen this month, but they rose in May due to Iran’s closure of the Strait of Hormuz, which has choked off about a fifth of the world’s oil supply.

More expensive diesel fuel has lifted shipping costs, with companies like UPS and FedEx adding fuel surcharges in the past couple of months. This has pushed up grocery prices, which jumped 0.7% in April and are 2.9% higher than a year ago.

Federal Reserve Response

The Federal Reserve is considering raising interest rates to combat inflation. The Fed’s next move will likely be a hike rather than a cut, with Wall Street investors expecting the Fed to raise rates in December.

Despite higher inflation, the job market appears to be improving, with hiring increasing to a healthy level in May, and the economy is still growing. These positive signs suggest the Fed doesn’t need to cut rates to stimulate growth and hiring.

Original reporting: NBC6 Miami — read the source article.