U.S. PCE Inflation Rises for First Time Since February, Fed Rate Cut Likely Delayed

Fresh data on Personal Consumption Expenditures (PCE) — the Federal Reserve’s preferred inflation gauge — shows inflation ticked higher in May, potentially delaying the long-awaited Fed rate cut into September or later.

According to the latest release:

• Core PCE (YoY): 2.7% (vs. 2.6% expected, 2.5% previous)
• Core PCE (MoM): 0.2% (vs. 0.1% expected, 0.1% previous)
• Headline PCE (YoY): 2.3% (matches forecast, up from 2.1%)
• Headline PCE (MoM): 0.1% (in line with expectations)

This marks the first uptick in PCE inflation since February 2025, signaling persistent inflationary pressures that may prompt the Federal Reserve to hold off on rate cuts.

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Fed Cautious Despite Strong Economic Data

While recent U.S. economic data has been largely positive, the Federal Reserve declined to cut rates in June, opting instead to watch key inflation trends more closely. With core PCE now rising, market expectations for a July cut have sharply declined, and a September cut is now the base case.

The Fed has repeatedly emphasized its commitment to returning inflation to the 2% target before easing monetary policy. Rising core inflation complicates this path, even as growth and labor market indicators remain strong.

Following the report, traders recalibrated rate cut odds, pricing in just one 25-basis-point cut in September, with further cuts now seen as conditional on future disinflation.

Kosta Gushterov

Kosta has been working in the crypto industry for over 4 years. He strives to present different perspectives on a given topic and enjoys the sector for its transparency and dynamism. In his work, he focuses on balanced coverage of events and developments in the crypto space, providing information to his readers from a neutral perspective.