US core PCE inflation rises to 3.4% in May, highest since October 2023
Core PCE, the Federal Reserve's preferred inflation gauge, climbed to 3.4% year-on-year in May, the highest reading since October 2023. The data signals renewed price pressure and complicates the case for near-term interest-rate cuts.
The core personal consumption expenditures (PCE) price index, which strips out food and energy, rose 3.4% year-on-year in May, according to the US Commerce Department. That marked the highest level since October 2023 and came in slightly above what economists had forecast.
The Federal Reserve watches core PCE closely when setting interest rates, favouring it over the headline figure. With the gauge sitting well above the central bank's 2% target, officials are likely to stay cautious on cutting rates. Policymakers held the benchmark rate steady at their most recent meeting.
Markets gave the report a mixed reception. Bond yields ticked higher briefly, while equity indexes held on to part of their gains. Investors are now focused on the central bank's guidance at its next meeting and on upcoming labour-market data.
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