Key Takeaways

• Core PCE in line: The core personal consumption expenditures price index rose 0.3% month-on-month and 3.4% year-on-year in May — matching economist estimates.
• Core ticks up slightly: Both the monthly and annual core readings edged above April’s figures, but without a negative surprise.
• Headline PCE beats: The headline measure rose 0.4% month-on-month — below the 0.5% consensus — and 4.1% year-on-year, in line with expectations.
• No hawkish shock: The in-line print avoids the scenario markets feared most — a hotter-than-expected reading that would have cemented aggressive Fed tightening bets.
• Oil slump a future tailwind: Rapidly declining oil prices since the U.S.-Iran peace deal should help ease future PCE readings, particularly on the headline measure.
• Fed rate path: Markets will continue digesting the data alongside last week’s hawkish Fed signals, with September and December hike probabilities remaining elevated.

The Federal Reserve’s preferred inflation gauge ticked up in May but at a rate that matched expectations, at a time when concerns about price pressures have eased amid rapidly sliding oil prices.

The core personal consumption expenditures (PCE) price index rose 0.3% month-on-month and 3.4% year-on-year in May — in line with estimates compiled by economists and analysts and ticking up slightly from April.

Meanwhile, headline PCE increased 0.4% month-on-month and 4.1% year-on-year in May, compared to consensus estimates of 0.5% and 4.1%, respectively — with the monthly reading coming in slightly below forecast.