US PCE prices rise in June

The U.S. Personal Consumption Expenditures (PCE) price index rose by 0.3% month-over-month in June 2025, marking the largest monthly increase in four months.

This followed an upwardly revised 0.2% gain in May and came in line with market expectations, reinforcing concerns about lingering inflationary pressures in the economy. The June reading signals a reacceleration in consumer prices after a relatively subdued stretch in early spring.

Breaking down the components, prices for goods climbed by 0.4%, a notable jump from the 0.1% rise recorded in May, reflecting higher costs for items such as household goods, apparel, and motor vehicles. Meanwhile, prices for services—accounting for a larger share of consumer spending—rose by 0.2%, matching the prior month's pace and underscoring ongoing cost pressures in sectors like housing, healthcare, and transportation.

The core PCE index, which strips out the volatile food and energy components and is closely monitored by the Federal Reserve, also rose by 0.3% in June. This represented its strongest monthly gain in four months and followed a 0.2% increase in May, aligning with economists’ forecasts.

The acceleration in core inflation suggests that underlying price pressures remain sticky, complicating the Fed's efforts to bring inflation back to its 2% target.

On a category-specific basis, food prices rose 0.3% in June, following a 0.2% gain in the previous month, driven in part by higher costs for dairy, grains, and processed goods. Energy prices posted a sharp turnaround, increasing by 0.9% after falling 1% in May, with higher gasoline and electricity prices contributing to the rebound.

On an annual basis, headline PCE inflation accelerated for the second consecutive month, reaching 2.6% in June from an upwardly revised 2.4% in May—exceeding the expected 2.5%. The uptick reinforces the view that inflation is proving more persistent than previously anticipated.

Core PCE inflation, meanwhile, remained unchanged at 2.8% year-over-year, though the May figure was revised up from 2.7%, adding weight to concerns that disinflationary momentum may be stalling.

These figures highlight the challenge facing the Federal Reserve as it weighs future interest rate decisions. The PCE index, being the Fed’s preferred inflation gauge due to its comprehensive scope and flexibility in capturing changing consumer behavior, carries significant weight in policymaking.

With both headline and core readings continuing to hover well above the 2% target, the June data suggests that the central bank may need to maintain a cautious stance, potentially delaying any rate cuts until inflation shows more convincing signs of cooling.