The Federal Reserve’s primary price gauge rose at its highest level since 2023, reinforcing the central bank’s recent tough talk on inflation.
The US headline PCE price inflation accelerated to +4.1%yoy in May-26 (Apr-28: +3.8%yoy), marking its highest print since Apr-23 and aligning with market expectations. Underlying price pressures remained equally firm, with the core PCE climbing faster at +3.4%yoy (Apr-26: +3.3%yoy), being the sharpest expansion since Oct-23. The increase in the PCE was driven by a +4.0%yoy surge in energy-related components alongside robust gains in housing (+0.3%yoy) and financial services (+1.2%yoy).
On a monthly basis, headline PCE rose +0.4%mom, marginally below consensus estimates of +0.5%mom as a cooling in goods inflation (+0.4%mom; Apr-26: +0.7%mom) partially offset a re-acceleration in services inflation (+0.5%mom; Apr-26: +0.3%mom), while core monthly PCE held steady at +0.3%mom. This persistent inflationary backdrop is reinforced by a highly resilient labour market, evidenced by a separate release showing weekly initial jobless claims easing by -12K to a lower-than-expected 215K in mid-June.
In response to these sticky price dynamics, at its June 2026 FOMC meeting, the US Federal Reserve raised its inflation forecasts, projecting PCE inflation at +3.6% and core PCE inflation at +3.3% for the year. Currently, according to the CME Fed Watch, market expectations price in a 75% probability for a +25bps rate hike at the Sep-26 meeting.
