PCE inflation report May 2025:

Consumer Prices Rise Slightly in May, Inflation Rate Inches Up

Consumer prices inched up in May, with the annual inflation rate moving further away from the Federal Reserve’s target, according to a recent report from the Commerce Department. The personal consumption expenditures price index, which is the Fed’s primary measure of inflation, rose by 0.1% for the month, bringing the annual inflation rate to 2.3%. This was slightly higher than the 2.3% expected by economists surveyed by Dow Jones.

When excluding food and energy prices, core PCE saw a 0.2% increase for the month, resulting in an annual rate of 2.7%. This was slightly higher than the 2.6% forecasted by economists. The Fed considers core inflation to be a more accurate measure of long-term trends due to the volatility of food and energy prices. The current inflation rate of 2.7% is above the Fed’s target of 2%.

Consumer spending and income also showed signs of weakening in May. Spending fell by 0.1% for the month, while personal income declined by 0.4%. These figures were below the expectations of economists, who had forecasted a 0.1% increase in spending and a 0.3% gain in income.

Despite the weaker economic data, market reactions were muted, with stock market futures pointing towards a positive open on Wall Street and Treasury yields rising slightly. The report suggests that the economy may be losing momentum in the second quarter as the impact of tariff increases begins to be felt.

The Federal Reserve is currently considering its next move on interest rates, with some market analysts speculating on a potential rate cut in July. However, others believe that such a move may be premature given the current economic conditions. President Trump has been urging the Fed to lower rates, citing low inflation as a reason for a rate cut.

Inflation pressures in May were generally subdued, with food prices increasing by 0.2% and energy-related costs declining by 1%. Services prices saw the most significant increase, rising by 3.4% from a year ago, while goods prices only rose by 0.1%.

Overall, the latest inflation data suggests that the economy may be facing some challenges in the months ahead. The Fed will likely continue to monitor the situation closely and make decisions based on the evolving economic landscape.