The US Core PCE Price Index rose 0.1% in May 2025, signaling slower inflation and bolstering hopes for a potential rate cut by the Federal Reserve later this year. On a year-over-year basis, Core PCE increased 2.6%, aligning with economist forecasts and showing continued moderation in price pressures.
As the Fed’s preferred inflation gauge, Core PCE excludes volatile food and energy prices, offering a clearer view of underlying inflation trends. The latest data suggests that consumer demand is softening and price stability is gradually returning.
Markets responded positively, with bond yields edging lower and stocks gaining modestly, reflecting increased optimism over the Fed’s monetary policy trajectory.
Investors will watch closely in the coming months to see if this disinflationary trend continues, potentially prompting the Fed to ease rates as early asSeptember.