WASHINGTON, June 25 (Reuters) - U.S. inflation increased further in May, breaking above 4.0% for the first time in three years as the Middle East conflict boosted energy prices, and potentially drawing the Federal Reserve closer to raising interest rates this year.

Economists raised their forecasts for a key gauge of US inflation this year and boosted estimates for job creation, scrapping the chance of a Federal Reserve interest-rate cut until well into 2027.

For the rest of 2026, models from forecasting companies like Trading Economics anticipate an inflation rate of about 3.5% through the middle of the year. After that, it may decline to around 3%.

US inflation hits a three-year high at 4.2% amid rising consumer spending. Inflation at 3.8% in June priced at 56% YES.

Consumers are increasingly feeling the strain of the US Israel war in Iran.

May's Personal Consumption Expenditures (PCE) index — the Federal Reserve's preferred inflation gauge — saw inflation rise to its highest level since 2023. The measure ticked up 0.4% month-over-month and 4.

How much control does the president really have over inflation?

The monthly PCE report is the Federal Reserve’s preferred inflation gauge. New Fed Chairman Kevin Warsh has said the central bank is committed to bringing inflation back to its