The core personal consumption expenditures price index rose to an annual rate of 3.4% in May, marking the highest level since October 2023.
The figure represents a significant acceleration in underlying price pressures, defying expectations for a continued cooling trend in the US economy.
Markets reacted swiftly to the hotter-than-expected data, with US Treasury yields climbing as investors recalibrated their expectations for Federal Reserve policy.
The rise in the Fed’s preferred inflation gauge suggests that the central bank may need to maintain a restrictive stance for longer than previously anticipated, particularly as energy costs continue to exert upward pressure on consumer prices.
This development follows a similar acceleration in the Consumer Price Index, which also hit a multi-year peak in May.
The persistent inflationary pressure is being driven largely by elevated energy costs, linked to ongoing geopolitical tensions in the Middle East.