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Annual Inflation Soars to 5 Percent In Biggest Jump Since 2008

Inflation took a fresh swipe at American consumers in May, with the consumer price index surging by 5 percent over the past year, the biggest annual spike in the measure since 2008.

On a monthly basis, May consumer prices rose by 0.6 percent from April, Labor Department figures showed, a slight drop from 0.8 percent the prior month, which was the biggest gain since June 2009.

The sharp jump in the year-over-year inflation number is partly due to the base effect, which is the idea that last spring pandemic lockdowns and the plunging economy pushed inflation to an abnormal low. The base effect is expected to level off in June.

While economists polled by Reuters predicted the annual consumer price index to rise by 4.7 percent and the monthly reading to come in at 0.4 percent in May, markets generally shrugged off inflation running hotter than expected. U.S. stocks opened higher, and while the interest rate on the benchmark 10-year Treasury note and the gold spot price initially ticked up, both quickly fell back down and remained largely flat at the time of reporting.

The muted market reaction is likely informed by repeated statements by Fed officials that they believe the price rise to be transitory and are willing to tolerate higher rates of inflation for some time to offset years in which it was lodged below its average target of 2 percent.