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Fed's Preferred Inflation Gauge Hits 3-Year High as PCE Rises to 4.1% in May

6/25/2026

The Personal Consumption Expenditures price index — the Federal Reserve's preferred measure of inflation — rose at an annual rate of 4.1% in May, reaching its highest reading in three years.

That combination of pace and trajectory signals that price pressures across the American economy have not eased, a development that directly shapes how the Federal Reserve approaches interest rate decisions.

What the PCE Index Is The Personal Consumption Expenditures price index tracks what American households pay for a wide range of goods and services.

It is the gauge the Federal Reserve relies on above all others when assessing inflation, in part because it captures shifts in spending behavior as prices change — if something gets expensive, consumers tend to buy less of it, and the PCE adjusts accordingly.