U.S. consumer prices rose 4.2 percent in May from a year earlier, the steepest annual gain since April 2023, the Labor Department said Wednesday, and President Trump told reporters in the Oval Office hours later that he found the number "great" and that, in fact, "I love the inflation."

The reading, up from 3.8 percent in April and 2.4 percent in January, lands six days before the Federal Reserve's first policy meeting under new Chair Kevin Warsh and four months into a U.S.-Iran war that has rewritten American household budgets through the price of fuel. It also lands in a midterm year in which the cost of living, once the president's strongest issue, has turned against him.

What the data showed

The Consumer Price Index rose 0.5 percent between April and May, the Bureau of Labor Statistics said, with energy alone accounting for more than 60 percent of the monthly gain. Gasoline jumped 7 percent on the month and 40.5 percent from a year ago. Airline fares rose 2.7 percent for the month and 26.7 percent for the year, a pass-through from jet-fuel costs as tankers struggle to transit the Strait of Hormuz. Core inflation, which strips out food and energy, ran at 2.9 percent, up from 2.8 percent in April.

Real wages went the other way. Average weekly earnings fell 0.2 percent in May and 0.7 percent from a year earlier, the largest annual decline since February 2023, the Labor Department said separately Wednesday. Average hourly wages have risen 3.4 percent over the past year, NPR reported, leaving workers' real spending power below where it stood last spring. Three-quarters of Americans told a recent CBS News poll their incomes are not keeping up with prices.

Some categories cooled. Grocery prices rose 0.1 percent, and new vehicles, household furniture and prescription drugs posted the first drop in goods prices in 14 months, said Gregory Daco of EY-Parthenon. Tomato prices, by contrast, surged 32 percent over the year and lettuce nearly 25 percent.

Trump in the Oval

Asked whether he was concerned about the 4.2 percent figure, the president said no. "The numbers were great. You know what I really love? I love the inflation," Trump said, according to CBS News. He told reporters the Navy had been quietly escorting tankers through the strait and destroying Iranian vessels at night, and that oil prices and inflation would fall "like a rock" once the war ends. Brent crude traded near $94 a barrel at midday Wednesday.

On Truth Social later in the day, the president said he had directed the military to "execute a secret mission" to escort commercial ships through the strait and credited the effort with moving more than 100 million barrels of oil into the open market.

Democrats moved on the remark within hours. "Trump really said, 'I love the inflation.' On camera. For all of America to hear," Senate Minority Leader Chuck Schumer wrote on X. "His contempt for you knows no bounds." House Minority Whip Katherine Clark accused the president of loving "making your costs skyrocket."

What the Fed sees

Federal-funds futures put the odds the Fed holds its benchmark rate in a 3.5 to 3.75 percent range next Wednesday at 96 percent, CME Group's FedWatch tool showed. The same tool now treats a hike as more likely than a cut later this year, a reversal from January when economists debated only the timing of the next cut.

Warsh, who took the chair May 22, has signaled he will look past the energy shock so long as it does not spill into broader prices. "What I'm most interested in is what's the underlying inflation rate, not what's the one time change in prices because of a change in geopolitics," he told senators at his April confirmation hearing, adding that the inflation risk "is still something that's being talked about around kitchen tables and boardrooms." Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack have said in recent weeks that the central bank's next move could be a hike.

"The Fed will be in no position to cut rates if this continues," Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in an email to CBS News.

The administration's case

House Speaker Mike Johnson, R-La., told reporters Wednesday that the president's remark had been pulled "totally out of context" and that Trump was contrasting today's number with the lower print he expects after the war ends. Johnson said "it's going to be great to have that [inflation] number and compare it to what comes next when we get these situations resolved." Trump himself told the New York Post that what he loved was that the figure had not run higher and that May's reading would prove the wartime peak. Several Wall Street economists landed closer to the administration's framing than its critics': Angelo Kourkafas of Edward Jones told Fox Business the data gave the Fed "some breathing room" while the supply shock plays out, and Scott Helfstein of Global X said the report "should help reassure investors and the Fed that inflation is not running wild." The U.S. Energy Information Administration, however, now projects retail gasoline will average $3.64 a gallon in 2027, up from a January forecast of $2.95.

The next test arrives Wednesday, when Warsh takes questions for the first time as Fed chair.