Fed vs. inflation

Inflation rises in the US according to the Fed's favorite measure

Inflation in the US amounted to 4.1 percent in May, according to the Federal Reserve's favorite measure, PCE inflation. This is higher than the April figure of 3.8 percent, measured at an annual rate, and in line with analysts' advance tips.

Core inflation, i.e. excluding food and energy prices, rose to 3.4 from 3.3 percent the previous month. This is the highest level since October 2023 and topped expectations.

In parallel, the growth figure for the US economy in the first quarter is being revised up. GDP growth amounted to 2.1 percent compared to the previous 1.6 percent measured at an annual rate.

"The worst inflationary pressure may be behind us"

The worst inflationary pressure and concerns about consumption are probably behind us. That's the verdict of experts after today's US inflation figure of 4.1 percent, according to PCE.

- As long as gasoline prices continue to fall, inflation expectations will likely do the same, Annex Wealth strategist Brian Jacobsen tells Bloomberg.

Chris Zaccarelli at Northlight Asset Management believes that inflation is starting to fall in line with falling oil prices, which could ease pressure on the Federal Reserve. But that would require next month's inflation figures to be lower than today's, he says.

BMO Capital Markets chief economist Scott Anderson believes that the inflation outcome speaks for a continued wait-and-see attitude by the Federal Reserve, but does not rule out another interest rate hike later this year. He points out that the continued high inflation in services is unlikely to be significantly dampened by falling energy prices.

- The battle between the hawks and the doves is therefore likely to continue, he tells Reuters.