US Import Prices Surge 1.9% in May, Double Expectations

US import prices rose 1.9% in May, nearly double the 1.0% expected, according to data released Tuesday. The report showed imported fuel prices surged 12.5% on the month, adding to a 47% three-month surge that is the largest since the COVID rebound period ended in July 2020. Nonfuel import prices also rose 0.8% in May, pushing the annual rate to 3.7%, the fastest 12-month pace since early 2023.

The data comes as the US dollar traded relatively flat ahead of the Federal Reserve's FOMC decision on Wednesday. The hotter-than-expected import price reading gives policymakers additional inflation data to consider, potentially reinforcing a hawkish stance. However, the caveat is that WTI crude oil has fallen to $77.64, the lowest since March 10, which should lead to a material drop in upcoming monthly readings. For currency traders, the persistent inflation signal supports the case for higher-for-longer US rates, which could underpin the dollar in the near term. Live FX prices and charts on NowPrice show how the market is reacting to the data.

Looking ahead, the focus shifts to Wednesday's FOMC decision and updated economic projections. The import price data may influence the tone of the statement and dot plot, particularly regarding inflation forecasts. Traders will also watch for any shift in the balance of risks between inflation and growth. Additionally, the decline in oil prices could provide some relief in future import cost readings, potentially moderating inflation pressures later in the year.