Price pressures are still running hot. May's Consumer Price Index came in at 4.2% year-over-year, the highest reading since April 2023 and a jump from April's 3.8%. The culprit? The ongoing Strait of Hormuz energy shock, which keeps feeding through the basket.

The number matched economist expectations, but that doesn't make it any less uncomfortable for the Federal Reserve. On a monthly basis, prices rose 0.5%—same as April's 0.6% but still above the Fed's comfort zone.

Strip out food and energy, and core inflation ticked up from 2.8% to 2.9%, also in line with forecasts. The good news: month-over-month core pressures slowed to 0.2% from 0.4%, slightly undershooting the 0.3% consensus. That's a small sign that underlying inflation might be cooling, even if the headline number looks ugly.

This marks the third straight hot inflation print under new Fed Chair Kevin Warsh, following April's 3.8% CPI and a 6.0% surge in producer prices. Wall Street is now pricing in higher odds of a rate hike later this year. The Fed's 2% target feels like a distant memory.

This is a developing story…