The Federal Reserves preferred inflation gauge has it it’s highest level in three years last May, new government data showed Thursday, making it likely more a interest rate increase later this year,
The Personal Consumption of Expenditures price index, which is an inflation measure that the Fed watches closely, rose 4.1% over the past year. The first reading, above 4% making it the highest reading in three years, bringing inflation back to levels last seen during the post-pandemic price surge.
This number was expected by economists, so these numbers do not surprise, but it surely doesn’t reassure the markets. Core PCE which strips out food and energy prices, is typically considered a better read to where inflation is actually headed. Core PCE rose 3.4% over the last year, slightly above the 3.3% economists forecasted comes close the last high of 3.5% last seen in October of 2023.
These numbers are can be traced back to the U.S.-led war against Iran, which sent oil and gas prices sharply higher. These energy costs have been seeping into prices across the wider economy, from transportation to manufacturing to financial services. Energy related goods and service prices rose 4% for the month alone.
Fragile ceasefire promises have been bringing down fuel prices down from their peaks, economists speculate May could mark the peak of this surge, however nothing verified. Price’s will not cool off quickly, tariffs were already pushing costs higher before the conflict began adding a second layer of pressure that doesn’t go away even if oil prices fall.
Whether you believe these numbers reflect an economy being handled properly or not is for you to decide. Despite these factors consumers still spent money even with price spikes, and with prices unlikely to cool off anytime soon be sure to use your money wisely.
-Elijah Iraheta, Editor in Chief, Saber News
