#USCorePCEMay

Core PCE Highlights: May 2025

1. Monthly Core PCE (exโ€‘food & energy): +0.2% MoM, above the +0.1% expected .

2. Annual Core PCE: +2.7% YoY, up from ~2.6% in April and surpassing expectations .

3. Headline PCE: +0.1% MoM, consistent with forecasts; +2.3% YoY, up from 2.2% .

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๐Ÿ” Market & Fed Takeaways

Inflation held above the Fed's 2% target, especially core inflationโ€”sticky at 2.7% .

Consumer spending fell 0.1โ€ฏโ€“โ€ฏ0.3% in May and incomes dropped ~0.4%, signaling weakening demand .

Fed interest rates remain steady (4.25โ€“4.50%). A July rate cut is now unlikely; September is the earliest plausible timing .

Treasury yields softened, while equities edged higher amid dovish signals and cooling consumer activity .

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๐Ÿงญ Implications Ahead

Rateโ€‘cut odds push back: Elevated core inflation delays monetary easing.

Policy watch: Fed remains cautious โ€” tariffs may fuel inflation further this summer.

Economic slowdown: As incomes and spending dip, growth concerns grow, limiting inflation surge.

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โœ… Summary

May Core PCE: +0.2% MoM โž 2.7% YoY

Headline PCE: +0.1% MoM โž 2.3% YoY

Fed outlook: Hold expected until at least September due to persistent inflation.

Consumer signals: Lower incomes/spending hint at a slowing economy.