US Core PCE Seen Climbing to Highest Since Oct. 2023 in Tonight's Release

BlockBeats reports that the U.S. Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, is due at 20:30 on June 25. Markets are bracing for a notable pickup in May inflation that could revive expectations for additional rate hikes. Consensus forecasts put headline PCE up 4.1% year over year in May, accelerating from 3.8% in April and marking the highest reading since 2023. Core PCE, which strips out food and energy, is expected at 3.4% year over year, up from 3.3% in April and the strongest since October 2023. Core PCE has remained above the Fed's 2% target since 2021. The recent near-term inflation uptick was driven in part by higher gasoline prices following the Iran conflict in May. After a U.S.-Iran peace agreement was signed, oil prices have gradually retreated. Core inflation, though, has also firmed, suggesting price pressures are not solely the result of geopolitically driven energy shocks. CME's FedWatch Tool showed that, as of Wednesday, markets were pricing a 34% probability of a 25-basis-point rate hike in July. Aditya Bhave, a U.S. economist at Bank of America Securities, said the current inflation pressures are partly linked to tariffs and one-time disruptions, while recurring supply shocks have tested the Fed's patience. He added that the potential for housing-driven disinflation has largely been exhausted. Data show core PCE eased to 2.6% in April, the lowest since 2022, but annualized gains over the past three and six months have both been hovering near 3.8%.