Price pressures in the US continue to mount. The core rate of the Personal Consumption Expenditures (PCE) index for May stood at 3.4 percent, according to an initial estimate. Experts had expected the same figure. The PCE index is the Federal Reserve’s preferred inflation gauge. The core rate excludes the more volatile prices for food and energy.
The index thus remains significantly higher than before the start of the Iran war. In February, the core rate was 3.0 percent, rising to 3.2 percent in March and 3.3 percent in April, the highest level since November 2023.
The Fed targets an inflation rate of two percent. The official inflation figure of 4.2 percent in May and the PCE index are therefore well above that. In response, the Fed left its key interest rate unchanged in the range of 3.5 to 3.75 percent at its most recent meeting last week.
Kevin Warsh, for whom the meeting was his first at the helm of the central bank, made clear that monetary policy could become more restrictive in the future. He spoke in favor of a possible rate hike in the second half of the year, and the inflation trend is likely to confirm his stance. In doing so, he is also defying US Donald Trump, who has repeatedly called for looser monetary policy from the central bank.
Source: www.handelsblatt.com
