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Macro EconomyMedium•25 June 2026•

1 min read

US Core PCE Rises to 3.4% in May as Strong Spending Pressures Fed

Key Facts

1The Core PCE price index, the Fed's preferred inflation gauge, rose to 3.4% year-over-year in May.

2Personal income rose 0.7% month-over-month in May, beating the 0.4% forecast, while personal spending also rose 0.7%, topping expectations.

Amid market expectations for cooling inflation, May data disappointed as the Core PCE price index, the Fed's preferred inflation gauge, rose to 3.4% year-over-year, according to the Bureau of Economic Analysis. Personal income rose 0.7% month-over-month, beating the 0.4% forecast, while personal spending also increased 0.7%, topping estimates. These figures reflect continued consumer strength despite price pressures.

This release follows mixed data last week: UK retail sales surged 1.2% month-on-month in May (vs. 0.5% expected) and Canadian inflation accelerated to 3.2% year-on-year in May from 2.8% in April, per market data. The rise in Core PCE adds pressure on the Federal Reserve to keep interest rates higher for longer, especially with spending remaining robust.

At the close on June 25, major equity indices showed little reaction, but Fed fund futures implied a slight reduction in rate-cut expectations. Traders are now eyeing Fed Governor Waller's speech scheduled for June 22 for policy clues, as well as June's PCE report which could set the next direction.