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Inflation rose last month to its highest level in four months as the cost of gas, food and groceries rose, reversing several months of cooling price pressures.

A key inflation gauge moved higher in May in the latest sign that prices remain stubbornly elevated while Americans cut back on their spending.

The Federal Reserve will continue to wait and see how the economy evolves before deciding whether to reduce its key interest rate, Chair Jerome Powell said June 24.

Federal Reserve officials expect inflation to worsen in the coming months but they still foresee two interest rate cuts by the end of this year, the same as they projected in March.

Retail sales fell sharply in May as consumers pulled back after a sharp increase in spending in March to get ahead of President Donald Trump’s sweeping tariffs on nearly all imports.

A key U.S. inflation gauge slowed last month as President Donald Trump’s tariffs have yet to noticeably push up prices, while American incomes jumped.

Inflation cooled for the third straight month in April even after some U.S. tariffs took effect, though economists and many business owners expect inflation will climb in the coming months.

The outlooks for the U.S. and global economies have worsened in the wake of President Donald Trump’s tariffs and the uncertainty they have created, the International Monetary Fund said.

U.S. inflation declined last month as the cost of gas fell, a sign that price growth was cooling even as President Donald Trump ramped up his tariff threats.

Economists at Goldman Sachs have raised their assessment of the odds the U.S. will experience a recession to 45% from 35% following President Donald Trump's tariffs announcement April 2.