May’s missing inflation is a mystery — and a sign that the Fed will hold off on rate cuts

A lot of things went right for U.S. inflation in May. The consumer-price index rose just 0.1% from April, and held under 2.5% in year-over-year terms for a third consecutive month. Some of the most volatile prices that consumers pay dropped, with both gasoline and eggs down more than 2% from April. The stickiest prices helped, too: Rent of primary residence registered its smallest increase since 2021, as housing inflation is finally getting back to normal.

More surprising in the May data was an absence of inflation in categories that seemed likely to be lifted by U.S. tariffs. New-vehicle prices fell 0.3%, while used cars and trucks fell 0.5%. Consumers scrambled to buy cars in March and April before pretariff inventory vanished from dealer lots, and inventories on dealer lots are leaner than a year ago — it’s a surprise that didn’t allow dealers to hike prices. Apparel prices also fell on the month and on the year, even though most clothing Americans buy is imported and subject to tariffs. Lower prices in these categories helped hold core inflation at the lowest since 2021 for a third month running.