WASHINGTON, June 17 (Reuters) - U.S. retail sales increased more than expected in May, but a slowdown is likely as the cushion from larger tax refunds against higher prices diminishes.

Retail sales jumped 0.9% last month after a downwardly revised 0.4% gain in April, the Commerce Department's Census Bureau said on Wednesday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.5% after a previously reported 0.5% increase in April. 

Some of the rise in sales last month reflected higher gasoline prices, which lifted receipts at service stations.

Gasoline prices surged to four-year highs amid the U.S.-Israeli war with Iran. They have since retreated, with the national retail average slipping below $4 a gallon this week for the first time since April. 

The U.S. and Iran on Sunday said they had agreed terms to end ​the war and reopen the Strait of Hormuz. Tax refunds have combined with a stock market rally to underpin spending, which also came at the expense of savings. The saving rate dropped to a four-year low in April.

The retail sales data likely has no impact on monetary policy, with the Federal Reserve later on Wednesday expected to keep the U.S. central bank's benchmark overnight interest rate in the 3.50% to 3.75% range. While the odds of a rate hike have increased as price pressures rise, economists do not anticipate policy tightening this year, pointing to easing oil prices.

Retail sales excluding automobiles, gasoline, building materials and food services increased 0.7% in May after an unrevised 0.5% advance in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

The tax filing season is over and a big chunk of the refunds is depleted. Economists at PNC Financial said an analysis of internal data showed "households are spending down refunds more quickly than in prior years, with higher gas outlays accounting for much of the difference." 

They added that this was "especially pronounced for households in the bottom quartile by refund size, which have drawn down more than 60% of their refunds in 2026 versus 43% at the same point last year."

Consumer spending, which accounts for more than two-thirds of the economy, increased at a 1.4% annualized rate in the first quarter. The economy grew at a 1.6% pace last quarter. The Atlanta Fed's GDP tracker shows the economy growing at a 2.8% pace this quarter.