US core PCE inflation hit 3.4% in May, highest since 2023
Why it matters: The 4.1% headline reading and stronger consumer spending kept rate-hike expectations alive for later this year.
The Federal Reserve’s preferred inflation gauge accelerated in May, with core personal consumption expenditures prices rising 3.4% from a year earlier, the highest level since October 2023. The Commerce Department said overall PCE inflation rose 4.1% annually and 0.4% from April, while core prices increased 0.3% on the month. Energy was a major driver after the Iran war pushed up gas prices, though AAA said the national average has since fallen to $3.92 a gallon from nearly $4.50 last month. Consumer spending also stayed firm, rising 0.7% in May, while personal income climbed 0.7%. The hotter inflation data reinforced expectations that the Fed could keep rates higher for longer and potentially raise them later this year.