<h1>Inflation gauge hits 2.3% in May as Americans cut spending for first time since January</h1> A key inflation gauge rose to 2.3% in May from 2.1% in April, while core inflation increased to 2.7%, both above the Federal Reserve's 2% target. Americans reduced spending for the first time since January, with overall spending falling 0.1% and incomes dropping 0.4%. The spending decline was partly due to reduced car purchases as consumers had accelerated vehicle buying earlier to avoid tariffs. Income drops resulted from one-time Social Security benefit adjustments. Despite broad-based tariffs, inflation impact remains modest as companies imported goods before duties took effect and are currently absorbing costs. Major retailers warn of upcoming price increases during back-to-school season. The Federal Reserve maintains cautious approach on rate cuts despite cooling inflation trends.