#USCorePCEMay U.S. Core PCE (Personal Consumption Expenditures) – May 2025:

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📊 Key Data (Released June 27, 2025)

Headline PCE (includes food & energy):

– May: +0.1% month-over-month; +2.3% year-over-year

Core PCE (excludes food & energy):

– May: +0.2% MoM (vs. +0.1% expected); +2.7% YoY (vs. +2.6% consensus)

Comparisons to April:

Headline PCE remained steady (+0.1%), while Core PCE rose from +0.1% to +0.2% MoM, and annual core moved up from 2.5% to 2.7%.

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🎯 Implications for the Fed & Markets

Sticky inflation above target: Core PCE remains elevated at 2.7%, well above the Fed’s 2% target

Rate-cut prospects dimmed: May’s hotter‑than‑expected core inflation has cooled chances of a July rate cut; markets are leaning toward a rate reduction in September instead

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🔍 Broader Economic Context

Consumer income & spending fell: Personal income dropped 0.4% and personal spending dipped 0.1%—signaling pressure on households

Tariff-driven effects: Inflation is being supported by tariffs, but spending slowdown suggests earlier front-loading in response to tariff news

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🏦 Fed Outlook

Fed Chair Jerome Powell has emphasized caution, noting that tariff effects are only beginning to come through in the data and signaling that further rate cuts may not occur until inflation shows sustained progress .

Analysts now see a low probability (~18%) of a July rate cut, with a higher chance (~70%) by September, contingent on future inflation data .

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📈 Market Reaction

Bond markets: Treasury yields modestly softened as markets digested slower spending amid inflation data

Stocks: U.S. equities (S&P 500, Nasdaq) extended gains, touching record highs, supported by resilient earnings and hopes that rate cuts may come later rather than sooner

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🔮 What to Watch Next

1. June inflation reports (CPI, PCE) for signs of tariff-driven price pressure.

2. Upcoming Fed commentary—watch Chair Powell or Fed speakers for hints on rate timing.

3. Policy surprises from Washington (e.g., tariffs, fiscal signals).