Breaking: US Core PCE Inflation Rises to 2.7% in May, Personal Spending Falls

Breaking: US Core PCE Inflation Rises to 2.7% in May, Personal Spending Drops

The US Bureau of Economic Analysis (BEA) released its May report on inflation and consumer data, showing a slight uptick in core inflation, while consumer spending and income softened.

Key Figures:

• Core PCE (YoY): 2.7% (↑ from revised 2.6%, forecast: 2.6%)
• Headline PCE (YoY): 2.3% (↑ from 2.2%, matching forecast)
• Monthly Core PCE: +0.2%
• Monthly Headline PCE: +0.1%
• Personal Income (MoM): -0.4%
• Personal Spending (MoM): -0.1%

What This Means

The core PCE Price Index, the Federal Reserve’s preferred inflation gauge, continues to hover above the 2% target, reinforcing caution over near-term rate cuts. While inflation is sticky, a decline in personal income and consumer spending suggests slowing demand, which could ease inflationary pressures over time.

Implications for the Fed

This mixed data puts the Federal Reserve in a tight spot. Sticky inflation supports the case for policy restraint, but falling spending and income could pressure policymakers to consider stimulus if economic weakness persists into Q3.

Market Reaction

Following the release:

• USD attempted a mild rebound after a week of losses.
• Gold and equities remain subdued as investors digest the report.
• Bond yields held steady, indicating cautious expectations for the Fed’s next move.

What’s Next?

Traders and policymakers will now turn to:

• Upcoming NFP data
• June CPI report
• FOMC meeting minutes

These will provide additional clarity on inflation trajectory and economic resilience.

Explore more: How Sticky Core Inflation Is Shaping Fed Policy in 2025