On Wednesday, June 10, the Bureau of Labor Statistics reported May’s Consumer Price Index. The data confirmed a troubling trend since the start of the Iran conflict: inflation is surging. The all-items index rose 4.2% year-over-year, with energy up 3.9% in May after a 3.8% rise in April and 10.9% in March. That energy spike, driven largely by the overseas conflict, accounted for over 60% of the monthly increase.
The numbers will shape decisions for both Social Security recipients and new Fed Chairman Kevin Warsh, who was sworn in on May 22 and will preside over the June 16–17 FOMC meeting. But the impact isn’t what it first appears.
Why the CPI data is bad news for Social Security recipients
With the surge in inflation demonstrated by the CPI data (including a 4.4% increase in CPI-W, the measure used to calculate the COLA), preliminary forecasts for the 2027 Cost of Living Adjustment suggest that seniors could be in for a considerably higher benefits increase next year. The Senior Citizens League is projecting a 3.8% COLA after the release of the May CPI data, which is a full percentage point higher than the 2.8% COLA that retirees received in 2026. A larger raise seems, at first glance, like it would be a positive for seniors, many of whom struggle to survive on limited Social Security benefits.
Unfortunately, COLAs are not like traditional raises. They are calculated specifically based on inflation data, so a higher adjustment is a direct indicator of above-average inflation. Since most retirees have other sources of funds not protected against inflation, large year-over-year price increases can have a detrimental impact on their buying power. This is especially true for retirees who follow common recommendations to maintain a relatively conservative investment portfolio in retirement.
Why the CPI data may be good news for Warsh
Inflation at 4.2% is bad for the Fed, whose 2% target has stayed out of reach throughout the post-pandemic era. Even core CPI, which strips out volatile food and energy and which the Fed weighs more heavily, rose 2.9%, well above target.
Yet the report may help Warsh. He takes office under heavy pressure from President Trump to cut rates or hold them steady. On Meet the Press, Trump said there’s “no reason” to raise rates and that “it should be the opposite.”
A softer inflation reading would have left Warsh exposed to that pressure. Instead, the hot CPI print, paired with a May jobs report that more than doubled forecasts, takes a rate cut off the table entirely. The clarity is a gift. It lets the new chairman demonstrate independence by holding rates steady and stripping the easing language from the Fed’s guidance, clearing the way for hikes later this year. Markets have already priced those in, and Warsh now has cover to support them despite the political push the other way.
In a perfect world, inflation would ease back toward target for retirees and Warsh alike. But with the Iran conflict keeping oil prices high and no end in sight, that relief looks unlikely soon.
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