The Federal Reserve's preferred price gauge rose to its highest level since 2023, new figures showed.
Concretely, the core personal consumption expenditures price index climbed 0.3% for the month, with the inter-annual figure clocking in at 3.4%, the highest number since October 2023. The figure was in line with the Dow Jones Consensus.
The index taking into account all items, including more volatile components like food and energy, stood at 4.1%, the highest since April 2023.
Energy again led price gains, with related goods and services increasing 4% for the month. Financial services and insurance climbed 1.2%.
Despite the increases, consumer spending was stronger than expected. Personal consumption expenditures increased 0.7% for the month, 0.1 percentage points above expectations and ahead of the inflation rate.
Figures come days after the Federal Reserve kept interest rates unchanged in Kevin Warsh's first meeting as chair.
The vote was unanimous, in contrast with previous meetings. "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," the central bank said in its statement. It added that "job gains have kept pace with the workforce."
Policymakers also released their expectations for the future. Concretely, they believe that, under current circumstances, they will implement one rate hike this year and cut it once in 2027.
The Fed is under continued scrutiny over how it will react to inflationary pressures, most of which have stemmed from the war in Iran.
The latest available headline figure before the meeting showed that inflation accelerated in May to its highest rate in three years, clocking in at 4.2%.
Before the latest figure, Fed officials said they expect core inflation, which excludes more volatile components like food and energy, to remain at 2.5% through 2027. The Fed said the "committee will deliver price stability." NBC News noted that, in contrast with previous documents, the Fed refrained from communicating what it might do in future meetings.
In this context, the inflation-adjusted wage gains that many American workers accumulated during the first year of President Donald Trump's second term have largely disappeared following the recent spike in consumer prices.
Real wages for production and nonsupervisory workers, a closely watched measure of earnings for rank-and-file employees, are up just 0.1% since Trump returned to office in January 2025 after a sharp erosion of purchasing power over the last four months. The decline came as inflation accelerated, largely driven by rising energy costs tied to the ongoing conflict involving Iran.
Real average hourly earnings for production and nonsupervisory workers fell 0.3% from April to May after accounting for inflation, while real average hourly earnings for all private-sector employees declined 0.1% during the month, according to BLS.
