Core PCE rose 3.4% year-over-year, reinforcing Fed concerns about persistent price pressures and potential rate hikes.
The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures index, accelerated to 4.1% year-over-year in May, matching forecasts but reaching a three-year high. Core PCE, excluding food and energy, rose 3.4%, up from 3.3% in April and in line with expectations.
Month-over-month, headline inflation increased 0.4%, slightly below the 0.5% consensus, while core inflation ticked up 0.3% from 0.2% in April. The data extends a trend of broadening price pressures, driven partly by higher energy costs but also by sustained core inflation.
Fed officials recently signaled a potential rate hike this year, with nine of 19 policymakers projecting at least one increase. Markets remain split on the likelihood of tighter policy amid stubborn inflation.