May PCE inflation forecast 4.1% year‑over‑year, peak expected

The May Personal Consumption Expenditures (PCE) price index is projected to rise 4.1% year‑over‑year, the highest level since April 2023, and analysts see it as the likely inflation peak for 2024 [1].

Inflation outlook and drivers

FactSet’s consensus forecast puts the May PCE index at a 4.1% annual increase, up from 3.8% in April and well above the Fed’s 2% target. On a month‑to‑month basis, the index is expected to climb 0.5%, while core PCE—excluding food and energy—is seen rising 0.4% month‑over‑month and 3.3% year‑over‑year, matching April’s pace [1]. Economists attribute the headline stickiness largely to higher energy prices, which remained elevated after reaching a three‑year high in April. Bank of America and UBS economists expect the May reading to mirror recent CPI and PPI data, reinforcing the view that energy and tariff effects are the primary inflation drivers [1].

Policy implications

Morningstar senior economist Preston Caldwell notes that, assuming tariff impacts fade and energy prices retreat, the upward pressure on consumer prices should ease later in the year [1]. Nevertheless, the Fed’s recent “more hawkish” tone suggests policymakers will continue a meeting‑by‑meeting approach, with expectations of at least one rate hike in 2026 despite the potential peak in May [1]. Deutsche Bank analysts project two rate increases this year, lifting the federal funds rate to 4.1% before a pause in 2027 [1].

What to watch

• June 25 PCE release at 8:30 a.m. EDT (actual figures will confirm or revise the forecast) [1].
• Federal Reserve policy meeting later in June, where the Fed may signal its stance on further tightening [1].
• Energy price trends, especially gasoline retail prices, which could influence the June core PCE trajectory [1].

The May PCE forecast signals that inflation may have peaked for 2024, but the path forward hinges on energy market developments and the Fed’s response to the data, leaving market participants attentive to both the upcoming report and the central bank’s next move.