The US core Personal Consumption Expenditures (PCE) price index rose to an annual rate of 3.4% in May, marking the highest level of underlying inflation since October 2023.
The figure represents a significant acceleration in price pressures, defying expectations for a continued cooling trend and signaling that disinflation has stalled at a critical juncture.
Wall Street is now bracing for the full PCE release, which the Federal Reserve regards as its preferred gauge of inflation.
The data point is widely viewed as the most critical input for policymakers as they navigate a restrictive monetary policy stance.
The hotter-than-expected core reading suggests that services inflation and shelter costs remain sticky, potentially forcing the Fed to maintain higher interest rates for longer than markets had priced in.
The acceleration in core PCE comes amid broader concerns about persistent inflationary pressures in the US economy.