U.S. May CPI Rises More Than Expected to 4.2%, Odds of December Fed Rate Hike Climb to 42.5%

The U.S. Consumer Price Index (CPI) is a key measure of inflation and an important factor in Federal Reserve interest-rate decisions. When price growth remains above the policy target for an extended period, the Fed typically has less scope to cut rates and may even resume raising them. Higher rate expectations can lift the dollar and bond yields while weighing on valuations for risk assets such as cryptocurrencies.

U.S. CPI inflation rose to 4.2% year on year in May 2026, exceeding market expectations, mainly because of a sharp increase in energy prices and signaling that inflationary pressure had yet to ease. After the data were released, markets scaled back bets on Fed rate cuts this year. The probability of a 25-basis-point rate increase in December climbed to 42.5%, putting downward pressure on risk assets.