On 25/6, the US Department of Commerce announced that the personal consumption expenditures (PCE) index for May increased by 4,1% compared to last year, marking its highest level since 4/2023. Excluding energy and food prices, core PCE rose by 3,4%, the highest since 10/2023.

These figures aligned with analysts' forecasts. PCE is the preferred inflation gauge for the US Federal Reserve (Fed). The Fed typically views core PCE as a long-term trend indicator, especially as this year's inflation is primarily influenced by energy prices due to the Middle East conflict.

Shoppers at a supermarket in New York City (US) in 11/2025. Photo: Reuters

Although oil and gas prices in the US have decreased in recent weeks, thanks to a ceasefire agreement between the US and Iran, economists believe inflation will continue to accelerate for some time. Last weekend, US President Donald Trump and Masoud Pezeshkian signed a preliminary peace agreement to reopen maritime routes blocked by the conflict.

Prior to the conflict, prices in the US had already risen due to the Trump administration's import tariffs. Rising living costs are becoming an obstacle for President Donald Trump and the Republican Party as they seek to retain control of Congress in the November midterm elections. Trump won the 2024 presidential election partly by pledging to cool inflation.

The Fed aims for 2% inflation. Last week, the agency maintained its benchmark interest rate at 3,5-3,75%. However, its quarterly economic forecast indicates officials plan to raise interest rates this year to curb inflation.

Despite high inflation, US consumers have maintained their spending levels this year, supported by larger tax refunds and a rising stock market. Households are also drawing down emergency funds and saving less.

Consumer spending, which accounts for over two-thirds of US GDP, increased by 0,7% in May, following a 0,4% rise the previous month. Consumer spending is projected to continue accelerating this quarter.

Ha Thu (according to Reuters, CNBC)