US Inflation Heads Towards 4% Amid Energy Price Surge

The US inflation rate has been above the Federal Reserve's target of 2% for five years, leading many to wonder if policymakers have accepted a higher level as acceptable.

With energy prices surging due to the closure of the Strait of Hormuz, economists are now predicting that inflation could reach 4%, up from the current rate of 3.5%.

According to the Cleveland Fed's real-time 'Inflation Nowcasting' model, core PCE is currently running at 3.7%, while headline PCE and CPI are tracking at 5.4% and 6.1% respectively.

UBS economist Alan Detmeister estimates that headline CPI inflation for May will come in at 4.3%, a rise of almost two full percentage points from February's rate, citing the significant increase in gasoline prices.