U.S. Inflation Data Shows Modest Price Gains in May, Fed’s PCE Index Reflects Stability

The U.S. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation measure, showed a slight increase in May, indicating stable price gains despite ongoing concerns about the economic impact of sweeping U.S. tariffs.

The headline PCE inflation for May rose by 0.1% on a month-on-month basis, matching the rate observed in April and in line with market expectations. On a year-over-year basis, the index increased by 2.3%, slightly higher than the upward-revised 2.2% in April, reflecting a modest uptick in inflation. This figure also met economists’ projections, signaling a relatively stable inflation environment.

Excluding volatile food and energy prices, the core PCE index advanced by 0.2% on a month-on-month basis and 2.7% on a year-over-year basis. Both of these figures were marginally higher than anticipated, but still suggest that inflationary pressures remain in check.

These data points are important for the Federal Reserve, as the central bank closely monitors the PCE index to guide its monetary policy decisions. The modest price gains seen in May suggest that inflation is being contained despite concerns over tariffs, which have raised expectations of higher consumer prices. As a result, the Fed may continue to maintain its cautious stance on interest rates as it balances inflation control with economic growth.