Inflation measure closely watched by the Fed rises 2.6% in May

An inflation measure closely watched by the Federal Reserve held steady in May as elevated prices continue to weigh on millions of Americans.

The personal consumption expenditures (PCE) index showed that prices were unchanged from the previous month, according to the Labor Department. On an annual basis, prices climbed 2.6%. Both of those figures are in line with expectations.

In another sign that inflation remains stubbornly high, core prices — which strip out the more volatile measurements of food and energy — climbed 0.1% from the previous month. From a year ago, prices are up 2.6%, the slowest annual rate since March 2021.

“The lack of surprise in today’s PCE number is a relief and will be welcomed by the Fed,” said Seema Shah, chief global strategist at Principal Asset Management. “Annual core PCE has now fallen to the lowest level in three years and should provide some comfort that inflation is once again decelerating. However, the policy path is not yet certain.”


While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously told reporters that core data is actually a better indicator of inflation. Both the core and headline numbers point to inflation that is still running well above the Fed’s preferred 2% target.

This is a developing story. Please check back for updates.

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