The Fed's preferred inflation gauge shows prices rising at fastest pace in 3 years

The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, accelerated in May, underscoring the central bank’s challenge in curbing prices. PCE rose at a 4.1% annual rate in May, matching economists’ forecasts in the run-up to the report, and compared with 3.8% in April, the highest level since April 2023. Core PCE, excluding volatile food and energy, increased 3.4%, slightly above the 3.3% forecast. Analysts linked the reacceleration to the Iran conflict, which pushed up oil and gasoline prices, raising fuel costs for US drivers. Oil has since eased, with Brent down 0.5% to $73.40 per barrel on Thursday and more than 35% below a recent peak near $114, though the latest PCE data did not reflect this change. Economists said consumer spending stayed strong as real spending rose 0.3% from April to May and inflation-adjusted incomes rose 0.3%, helped by larger tax refunds and stock gains.