1. What Is Core PCE ?
The Core Personal Consumption Expenditures (PCE) Price Index excludes food and energy, making it the Federal Reserve’s favored barometer of underlying inflation.
2. May’s Inflation Data
Headline PCE rose 0.1% month-over-month, lifting year-over-year inflation to 2.3% .
Core PCE increased 0.2% MoM, bringing annual core inflation to 2.7%, slightly above the 2.6% forecast .
3. Why It Matters
The Fed remains cautious on rate cuts, delaying any aggressive moves until inflation cools more decisively .
Despite weakness in consumer spending (down 0.1%) and income (–0.4%), inflation showed resilience — a mixed signal for policymakers .
4. Market & Policy Impacts
Stocks rallied to record highs as investors bet on potential rate cuts in September .
The U.S. dollar softened based on the slightly cooler headline reading, further lifting equity and bond markets .
---
✅ The Takeaway
May’s Core PCE data suggest inflation remains stubbornly above the Fed’s 2% target. While this likely delays near-term rate cuts, it doesn’t derail expectations entirely—markets still price in potential easing later this year.
---
💬 Join the Conversation:
Is Core PCE’s stubborn tone a sign the Fed must hold rates longer, or is it a temporary blip? Share your thoughts below !