US Inflation Accelerates in May – PCE Rises to 4.1 Percent Year-Over-Year

Background: PCE as the Preferred Inflation Indicator

Energy prices, driven up by the Iran war, are fueling inflation. This development comes as the central bank had most recently left its key interest rates untouched.

For income, the ministry reported an increase of 0.7 percent. Personal income thus significantly exceeded the forecasts of economists. "Private US-Einkommen steigen stärker als erwartet" – this is how Dow Jones Newswires summarized it; its survey had expected an increase of 0.4 percent.

Economists' Expectations Exceeded

Economists surveyed by Dow Jones Newswires had expected an increase of 0.6 percent in consumer spending. For the PCE inflation measure, they had assumed 3.4 percent year-over-year and 0.3 percent month-over-month – both figures were exceeded.

The PCE index is the preferred price measure of the US Federal Reserve and is therefore closely watched in financial markets. The Fed targets an inflation rate of 2 percent. At an annual rate of 4.1 percent, it remains well above this goal.

Implications for Monetary Policy

The data was released on June 25, 2026 at 08:44 ET (12:44 GMT) by Dow Jones Newswires. In financial markets, the PCE figures are considered a central benchmark for the Fed's future monetary policy.

Persistently high inflation combined with rising income raises questions about the future direction of US monetary policy. Observers interpret the combination of robust consumption and stubborn inflation as an indication that the Fed may continue to hold off on rate cuts.