US PCE Inflation Steady at 0.4%

The US PCE price index rose 0.4% month-over-month in May 2026, matching April's increase and less than market expectations of a 0.5% advance. Goods inflation eased to 0.4% from 0.7%, while services inflation rose to 0.5% from 0.3% in each of the previous two months. The core PCE index, which excludes food and energy, increased 0.3%, the same as an upwardly revised 0.3% in the previous month and matching market forecasts. On an annual basis, headline PCE inflation accelerated for a third consecutive month to 4.1% from 3.8%, confirming expectations and marking the highest level since April 2023. Core PCE inflation edged up to 3.4% from 3.3%, also in line with forecasts and reaching its highest level since October 2023. At its June 2026 meeting, the Federal Reserve raised its inflation forecasts, projecting PCE inflation at 3.6% and core PCE inflation at 3.3% for the year, both remaining well above the central bank's 2% target.

The US PCE price index is expected to rise 0.5% month-over-month in May 2026, accelerating from a 0.4% increase in April, as higher energy costs linked to the conflict with Iran continue to put upward pressure on prices. The core PCE index, which excludes food and energy, is projected to increase 0.3%, up from 0.2% in the previous month. On an annual basis, headline PCE inflation is forecast to accelerate for a third consecutive month to 4.1%, the highest reading since April 2023, compared with 3.8% in April. Core PCE inflation is also expected to edge higher to 3.4% from 3.3%, marking its strongest pace since late 2023. Overall, the report is likely to reinforce the view that inflationary pressures remain elevated in the US economy. Reflecting these concerns, the Federal Reserve raised its inflation projections at its June 2026 meeting, forecasting PCE inflation at 3.6% and core PCE inflation at 3.3% for the year, both remaining well above the Fed's 2% target.

The US PCE price increased 0.4% month-over-month in April 2026, less than market expectations of 0.5%, following a 0.7% jump in March, which was the sharpest gain since June 2022. Goods prices increased 0.7% (vs 1.4% in March), while services inflation was steady at 0.3%. The core PCE index, which excludes food and energy, increased 0.2% after a 0.3% gain in March. On an annual basis, headline PCE inflation accelerated for a second straight month to 3.8% from 3.5% in March, reaching its highest level since May 2023 and aligning with headline CPI inflation. Core PCE inflation edged higher to 3.3% from 3.2%, marking its highest reading since late 2023.