In May, US inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, moderated to 2.6% year-over-year from 2.7% in April, according to the US Bureau of Economic Analysis. This figure met market expectations. On a monthly basis, the PCE Price Index showed no change in May.
The core PCE Price Index, excluding volatile food and energy prices, rose 2.6% year-over-year, down from a 2.8% increase in April. Month-over-month, the core PCE Price Index increased by 0.1%.
Additional details from the report indicated a 0.5% monthly growth in Personal Income for May, while Personal Spending rose by 0.2%.
Market Reaction to US PCE Inflation Data: Following the release, the US Dollar Index, which tracks the dollar against a basket of major currencies, initially edged lower, recording a 0.1% decline to 105.80 at the time of reporting.
Scheduled for release at 12:30 GMT, the core PCE Price Index is the Federal Reserve’s preferred inflation gauge, anticipated to show a 0.1% monthly increase and maintain a 2.6% year-over-year rise for May. This data is closely monitored by investors for its impact on Fed policy decisions, particularly regarding interest rates.
The CME Group FedWatch Tool indicates a 37.7% probability that the Federal Reserve will maintain the policy rate unchanged in September. Depending on the core PCE results, a stronger-than-expected increase could bolster the US Dollar, while a weaker figure may prompt USD selling ahead of the weekend, potentially influencing currency pairs like EUR/USD.
