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The Fed's preferred inflation gauge shows prices rising at fastest pace in 3 years
CBS News • • general
Key Points:
- The Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred inflation gauge, rose at a 4.1% annual rate in May, marking the highest level since April 2023 and matching economists' forecasts.
- Core PCE, which excludes volatile food and energy prices, increased by 3.4%, slightly above expectations, driven in part by higher service costs and the inflationary impact of the Iran war on oil and gasoline prices.
- Despite rising inflation, consumer spending remained strong in May, with inflation-adjusted spending and incomes both increasing by 0.3%, supported by larger tax refunds and stock market gains.
- Oil prices have recently declined due to hopes of reopening the Strait of Hormuz, potentially signaling a peak in headline inflation, though this easing is not yet reflected in the May data.
- The Federal Reserve is maintaining interest rates for now but remains committed to reducing inflation to 2%, with stronger GDP growth and persistent inflation suggesting rates may stay steady until conditions improve.
