The May inflation numbers are due out Wednesday morning. Here’s what to expect

Inflation in the United States continues to rise, with the consumer price index expected to show a 4.2% annual rate in May. This marks the first time since May 2023 that inflation has surpassed 4% and is the highest reading since April of that year. The surge in energy costs due to the Iran war has been a major factor contributing to the increase in the headline number, which was at just 2.4% a year ago. Even core prices, which exclude food and energy, are projected to rise to 2.9% annually.

There are growing concerns that inflation is spreading throughout the economy as oil prices continue to climb. Liz Ann Sonders, chief investment strategist at Charles Schwab, attributes the rise in inflation to a combination of factors including money supply and artificial intelligence. She warns that inflation may not dissipate quickly, despite the Trump administration’s belief that it will decrease once the conflict in the Middle East is resolved.

Sonders cautions against relying on a quick resolution to the war to alleviate inflation, as the disruption to oil production may have lasting effects. Even if the fighting ends, oil prices may not return to previous levels due to the damage to supply chains. In April, annual headline inflation was at 3.8% and the core rate stood at 2.8%. The Bureau of Labor Statistics is set to release the latest inflation report at 8:30 a.m. ET.

As inflation continues to rise, investors are becoming increasingly skittish about the impact on the equity market. The uncertainty surrounding inflation and its potential long-term effects on the economy are causing concern among market participants. It remains to be seen how the Federal Reserve will respond to the persistent inflationary pressures and whether further action will be taken to address the issue.