Menu Prices

Consumer prices rose 0.5% in May, building on solid gains of 0.9% in March and 0.6% in April. These increases were largely driven by higher gasoline prices, which jumped 7.0% in May and are up 40.5% year-over-year, reflecting significantly reduced traffic through the Strait of Hormuz. Food prices increased 0.2% in May, slowing from a 0.5% gain in April. As a result, headline inflation accelerated to 4.2% year-over-year in May, up from 3.3% in March and marking the highest rate since April 2023.

Core CPI, which excludes food and energy, rose 0.2% in May, easing from a 0.4% increase in April. On a year-over-year basis, core inflation came in at 2.9% in May, slightly above April’s 2.8% reading and the highest since September.

Price increases in May were led by medical care services (+0.5%), shelter (+0.3%), apparel (+0.3%), and used cars and trucks (+0.1%). In contrast, prices declined for medical care commodities (-0.7%), transportation services (-0.6%), new vehicles (-0.3%), and household furnishings and supplies (-0.2%).

Overall, inflationary pressures have trended in the wrong direction year-to-date, rising at a pace not seen in three years. While much of this acceleration reflects the impact of the conflict in Iran and sharply higher energy prices, the underlying trend is one the Federal Reserve cannot ignore, leaving policymakers in a difficult position. At the same time, the labor market and broader macroeconomy have remained relatively resilient despite heightened consumer and business uncertainty.

As a result, the Federal Open Market Committee is likely to hold policy steady in the near term. Interest rate cuts appear unlikely in the near term, and there is growing speculation that rate hikes could return later this year if inflationary pressures continue to build.

Menu prices rose 0.3% in May, up 3.5% over the past 12 months

Menu prices edged up 0.3% in May, following increases of 0.2% in both March and April. Year to date, restaurant menu prices have risen at an average monthly pace of 0.2%. On a year-over-year basis, menu prices are up 3.5% from May 2025, marking the slowest pace of growth in 16 months. While restaurant price inflation remains firm, it is well below the 8.8% peak reached in March 2023, the fastest increase in more than two decades.

By comparison, grocery prices rose just 0.1% in May after jumping 0.7% in April, averaging a 0.3% monthly increase so far this year. Over the past 12 months, food-at-home prices have climbed 2.7%. The gap between grocery and restaurant price inflation has narrowed notably year to date—an important dynamic for the industry as consumers weigh the relative cost of dining out versus eating at home.

In the food away from home category, menu prices grew 0.3% at both fullservice and limited-service establishments in May. Limited-service menu prices have averaged 0.3% growth per month through the first five months of 2026, with fullservice menu prices averaging 0.2% per month year to date. Inflation in both segments has moderated significantly from earlier peaks: full-service restaurant prices surged as high as 9.0% year-over-year in 2022, while limited-service prices peaked at 8.2% in April 2023.

Within the broader food-away-from-home category, prices at vending machines and mobile vendors increased 0.4% in May, with food prices at employee sites and schools unchanged for the month. Menu prices for other food away from home rose 0.2% in May. Year-over-year, prices at employee sites and schools rose 3.6% since May 2025, with prices at vending and mobile vendors up 2.5%. The broader “other food away from home” category posted a 4.5% annual increase in prices in May year-over-year.        

Regionally, menu prices grew 0.4% in the Northeast, with 0.3% growth in the Midwest and South and 0.2% in the West. Over the past 12 months, restaurants in the Midwest had the fastest menu price growth at 3.7%, followed by year-over-year gains of 3.6% in the South, 3.5% in the Northeast, and 3.3% in the West.