The biggest pickup in core consumer inflation in nearly three years makes the Fed's job tougher and adds fuel to market speculation that it will move faster to raise interest rates.
The consumer price index climbed 0.4 percent in May from a month earlier, higher than expected and the biggest increase since February 2013. The annual increase was 2.1 percent, following April's 2 percent year over year gain. Core CPI, excluding food and energy, was up 0.3 percent, the biggest increase since August 2011.
"It turns the heat up, and I think you'll hear the hawks turning up the volume, but I don't think the Fed in any way will respond to this," said Ward McCarthy, chief financial economist at Jefferies. "This will do two things. It will create a little more uncertainty about the Fed and create some volatility. Second, I think it will draw an even sharper distinction between the hawks and the doves, which will be a contributing factor to the increased uncertainty about the Fed."