Consumer prices rose 4.2% annually in May, highest in three years

Summary

CNBC's Rick Santelli breaks down the May CPI data on Squawk Box. Headline CPI rose 0.5% month-over-month and 4.2% year-over-year, both matching expectations, while core CPI increased 0.2% month-over-month, below the 0.3% estimate. The headline CPI index hit a new all-time high, and real average hourly earnings turned more negative, though wage pressures are not embedding. The data may influence interest rate expectations.

• Headline CPI rose 0.5% m/m and 4.2% y/y, both as expected.
• Core CPI rose 0.2% m/m, below the 0.3% estimate, half of the prior month's 0.4%.
• Year-over-year core CPI came in at 2.9%, the warmest since 3.0% in September of last year.
• The headline CPI index (since 1913) and core CPI index (since 1957) both set new all-time highs.
• Real average hourly earnings turned more negative, -0.7% y/y, the most negative since February 2023.
• Wage pressures are not embedding, as earnings are not keeping up with inflation.
• Interest rates were volatile following the data release.