Fed's favored inflation gauge shows consumer prices ticked slightly higher in May

The Federal Reserve's preferred inflation gauge showed that prices ticked slightly higher in May as the central bank waits for signs of tariff-induced inflation reaching consumers this summer.

The Commerce Department on Friday reported that the personal consumption expenditures (PCE) index rose 0.1% on a monthly basis and 2.3% compared with a year ago. Those figures are largely in line with LSEG estimates, while the annual headline figure was up from 2.1% last month.

Core PCE, which excludes volatile food and energy prices, was up 0.2% from a month ago and 2.7% on an annual basis, slightly higher than LSEG estimates.

Federal Reserve policymakers are focusing on the PCE headline figure as they try to bring inflation back to their long-run target of 2%, though they view core data as a better indicator of inflation. Headline PCE was up from 2.1% in April, while core PCE also ticked higher from 2.5%.

Prices for goods rose 0.1% on both an annual and monthly basis. Durable goods prices were flat compared with the prior month and 0.5% higher than a year ago, while prices for nondurable goods were up 0.1% for the month and down 0.2% from last year.

Services prices were 3.4% higher in May compared with a year ago.

Wages and salaries rose 0.4% on a monthly basis in May, little changed from the prior three months.

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