US May PCE Expected to Rise 4.1% Amid Hopes Inflation Has Peaked

Continued Upward Trend Expected in May After April

Economists Project a 4.1% Increase

Core PCE Inflation Forecast at 3.4%

The Personal Consumption Expenditures (PCE) price index, which is the inflation gauge most closely watched by the U.S. Federal Reserve (Fed), will be released on June 25 at 21:30 KST. The market expects the PCE to continue its upward trend this month, following last month’s increase. However, there are also views that the inflation rate may have peaked, citing the recent decline in international oil prices and the easing of tariff impacts.

On the 24th (local time), citizens are walking on the streets of Manhattan, New York City, USA. Photo by Reuters Yonhap News

According to financial data provider FactSet, economists expect the PCE price index for May to rise by 4.1% year-on-year. This would be the highest level since April 2023 and exceeds the April increase of 3.8%. The core PCE, which excludes the volatile food and energy sectors, is forecast to rise by 3.4% from a year earlier.

Economists believe that May could mark the peak of inflation for this year. This is because international oil prices have recently declined, and the price pressures from U.S. tariff policy are expected to gradually ease. Preston Caldwell, Senior Economist at Morningstar, stated, “As the impact of tariffs subsides and energy prices drop, downward pressure will emerge going forward,” but added, “This assumes that the Strait of Hormuz does not experience another prolonged blockade.”

Wall Street also expects the PCE for May to remain at a high level, but anticipates that the upward trend will slow thereafter. UBS predicted, “It is highly likely that May will be the peak for headline PCE inflation,” and projected, “A more pronounced slowdown will be seen from July onward.”

With inflation remaining on the rise, the likelihood of further interest rate hikes has increased again. Deutsche Bank forecasts that the Fed will raise rates twice this year, bringing the federal funds rate up to around 4.1%. The bank also expects the Fed to keep rates unchanged through 2027, with a rate cut not likely until 2028.

The fact that the Fed has taken a more hawkish stance than the market expected since Kevin Warsh assumed the chairmanship is also strengthening expectations of further rate hikes. However, since Chairman Warsh recently presided over his first Federal Open Market Committee (FOMC) meeting and emphasized the importance of market data and real economic indicators, it is difficult to make definitive predictions at this stage.

This content was produced with the assistance of AI translation services.