Inflation in the US rose unexpectedly last month to a fresh four-decade high of 8.6%, the labor department said on Friday. The latest consumer price index (CPI) figures showed that the cost of living increased by one percentage point from April and was broad-based, with the indexes for shelter, gasoline and food being the largest contributors. Gas prices have been soaring across the US, approaching $5 a gallon this week – $1.90 more than a year ago. According to the latest CPI report the energy index rose 3.9% over the month, with the gasoline index rising 4.1%. Other major component indexes also increased. The food index rose 1.2% in May as the food at home index increased 1.4%. May’s rise was driven by sharp increases in energy costs, which rose 34.6% from a year earlier, and groceries, which jumped 11.9% on the year. Food and energy prices are more volatile than other categories included in the CPI, and the labor department publishes a “core prices” index which excludes them. It rose 0.6% from April. The news sent stock markets into a tailspin. The S&P 500 and Dow indices fell over 2% and the tech-heavy Nasdaq was down over 3.5%. Inflation fears have also battered Joe Biden’s poll numbers and his administration has sought to blame Russia’s invasion of Ukraine for rising prices. The war in Ukraine and the continuing disruption to global trade caused by the coronavirus pandemic have both contributed to rising prices for food and energy. But there were worrying signs of inflation spreading. Shelter costs were up 5.5% compared with a year ago. After three months of declines, prices for used cars and trucks rose 1.8% in May from April and are up 16.1% over the year. The yearly increase in inflation was up from the 8.3% increase in April and higher than economists had expected. Inflation is now running at a rate last seen in ​​December 1981. The Federal Reserve meets next week and is expected to once more raise interest rates as it struggles to tamp down rising prices. Last month the Fed announced its largest hike in interest rates since 2000, increasing interest rates by 0.5 percentage points, and economists are speculating the Fed may move to increase the pace of rises. “What an ugly CPI print,” said Seema Shah, chief strategist at Principal Global Investors. “Not only was it higher than expected on almost all fronts, pressures were clearly evident in the stickier parts of the market. The decline in inflation – whenever that finally happens – will be painfully slow. The Fed’s price stability resolve is going to be really tested now. “Policy rate hikes will need to be relentlessly aggressive until inflation finally starts to fade, even if the economy is struggling.”