PCE Inflation Accelerates. But Tariffs Haven’t Shown Up Yet: Why the Fed Is in Wait-and-See Mode

By Wolf Richter –  WOLF STREET

The 6-month PCE price index accelerated to 2.8% annualized, despite dropping energy prices. It’s been 2.7% to 3.3% in 2025, sharply higher than in the 2nd half of 2024.

The inflation measure released today for May – the overall PCE price index favored by the Fed as yardstick for its inflation target – re-accelerated month-to-month and year-over-year, despite the steep drop in the components for energy.

The “core” PCE price index, which excludes the food and energy components, also re-accelerated month-to-month and year-over-year.

The year-over-year readings of both the overall PCE price index and the core PCE price index moved further away from the Fed’s 2% target.

There are still no signs in the inflation data that the new tariffs are getting passed to consumers. If that happens in future months, and to whatever extent it might happen, it would add to inflation.