Inflation surged to 4.2% in May — the highest in three years

Month over month, the all-items index gained 0.5% on a seasonally adjusted basis, with energy prices responsible for more than 60% of that rise. A 3.9% jump in the energy index pushed its 12-month gain to 23.5%, while gasoline alone surged 7.0% for the month and 40.5% from a year earlier.

Excluding food and energy, the core CPI posted a 0.2% monthly gain and a 2.9% annual increase. That monthly figure came in under the 0.3% that Dow Jones-polled economists had anticipated, according to CNBC, offering a small upside surprise for markets. Shelter, a closely watched component for Fed policymakers, added 0.3% for the month, a slowdown from the 0.6% recorded in April.

Food prices increased 0.2% in May. Grocery prices rose 0.1% while restaurant and other food-away-from-home costs rose 0.3%. Over the past year, the food index is up 3.1%.

Among other categories, communication costs climbed 1.3%, airline fares jumped 2.7%, and motor vehicle insurance fell 1.7%. Prices for new vehicles edged down 0.3%, and the broader transportation services category slipped 0.6%.

The inflation data arrives ahead of a Federal Reserve interest rate decision scheduled for June 17. Markets had priced in a roughly 98% probability that the Fed would hold rates steady at that meeting before Wednesday's report, according to Business Insider. The meeting will mark the first chaired by Federal Reserve Chair Kevin Warsh.

For the second consecutive month, wage growth failed to keep pace with rising prices. With average hourly earnings up 3.4% from a year ago, workers saw their real purchasing power slip 0.7% annually and 0.1% on a monthly basis.

Supply chain disruptions in the Middle East are likely to keep inflation running high for the foreseeable future, Bankrate senior economic analyst Mark Hamrick said. "The dividing line between the haves and the have nots is dictating whether consumers are able to keep with rising price levels," Hamrick said.

Wednesday morning trading saw equity futures in negative territory, pressured in part by escalating U.S.-Iran hostilities. Oil markets reflected similar anxiety, with Brent crude pushing past $92 a barrel.