WASHINGTON — The U.S. Commerce Department on Thursday released its Personal Consumption Expenditures (PCE) report for May, showing that the core PCE price index, the Federal Reserve’s preferred measure of underlying inflation, continued to rise while remaining broadly in line with economists’ expectations.
According to data from the Bureau of Economic Analysis, the core PCE price index, which excludes food and energy prices, increased 0.3% in May from the previous month and rose 3.4% from a year earlier. The annual increase was the highest since late 2023, according to government data and market reports. Overall PCE inflation rose 0.4% in May and 4.1% on a year-over-year basis.
The report was released on Thursday as policymakers, investors and economists continued to monitor inflation trends for signs of progress toward the Federal Reserve’s 2% target. The PCE price index is closely watched by the central bank because it measures a broad range of consumer expenditures and accounts for changes in spending patterns.
“The personal-consumption expenditures price index climbed by 0.4% in May,” the Commerce Department said, according to a summary of the report cited by financial news services. Excluding food and energy, “core PCE prices rose by 0.3%.”
Reuters reported that higher energy costs were a significant contributor to the increase in overall inflation during the month. The news agency said annual PCE inflation reached its highest level since April 2023, while core inflation remained elevated despite showing a slower pace than the headline measure. Consumer spending also increased in May, supported by gains in household income and continued economic activity.
The inflation report was released alongside other economic data showing continued growth in business investment and an upward revision to first-quarter gross domestic product. Economists cited by Reuters said the combination of firm consumer spending and persistent inflation would remain an important consideration for Federal Reserve officials in upcoming policy discussions.
Financial markets reacted cautiously following the release. Treasury yields edged lower after the data, while currency markets adjusted expectations for future interest-rate moves. Market participants said the inflation figures largely matched forecasts, limiting immediate volatility.
Federal Reserve officials have repeatedly stated that future policy decisions will depend on incoming economic data. The central bank left interest rates unchanged at its most recent meeting while continuing to monitor inflation, employment and broader economic conditions.
As of Friday, the May PCE report represented the latest official reading on U.S. consumer inflation. Policymakers and investors are expected to focus on upcoming economic releases for further evidence on the direction of prices and economic activity.
