PCE inflation surges to three-year high of 4.1%
U.S. inflation increased further in May, breaking above 4.0% for the first time in three years as the Middle East conflict boosted energy prices, and potentially drawing the Federal Reserve closer to raising interest rates this year.
The personal consumption expenditures price index surged 4.1% in the 12 months through May, the largest increase and first reading above 4.0% since April 2023, the Commerce Department’s Bureau of Economic Analysis said Thursday.
PCE inflation rose by an unrevised 3.8% in April. Economists polled by Reuters had forecast PCE inflation advancing 4.1%. The PCE price index climbed 0.4% month-on-month in May after increasing 0.4% in April.
The U.S.-led war against Iran has pushed up oil prices, driving gasoline prices higher. Though oil and gasoline prices have retreated in recent weeks amid a fragile ceasefire, economists expected inflation to remain elevated for a while.
President Donald Trump and his Iranian counterpart Masoud Pezeshkian last week signed a preliminary peace deal that would reopen oil and other shipping lanes that were frozen by the war.
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