The overall Personal Consumption Expenditures (PCE) deflator rose by 0.45% month over month in May, close to the consensus forecast, while core PCE, which excludes the volatile food and energy categories, increased by 0.32% m/m. Freedom analysts expect inflation to decline over the summer months and note that the key driver will be a drop in oil prices.
PCE is a macroeconomic indicator that measures changes in the prices of goods and services in the U.S. The Federal Reserve (Fed) uses it as a benchmark when making interest-rate decisions. On a year-over-year basis, headline PCE came in at 4.07%, while the core measure reached 3.41%.
According to Freedom Broker estimates, if the current trend persists, fuel prices within PCE could fall by 35–40% over three months, helping to ease inflationary pressure.
At the same time, risks remain. The services sector is a concern: in May, prices were rising as quickly as during the January peak, with the PCE deflator climbing to 0.45% m/m. Transportation services, financial and insurance services, as well as communications and delivery services, rose notably.
Among other inflation risks, experts cite the lagged effect of import tariffs, a rise in business inflation expectations, and a potential increase in prices for computer components.
Freedom Broker analysts believe that if these inflation risks do not materialize in the coming months, the Federal Reserve will most likely keep the interest rate unchanged through the end of 2026. However, if inflationary pressure intensifies, the Fed may consider additional monetary-policy tightening.
This is not an individual investment recommendation.