25 June 2026
If you are covering the latest US PCE inflation and GDP data, please see the following comment from Lindsay James, investment strategist at Quilter:
“The US GDP and PCE inflation figures out today are unlikely to materially change the market narrative, particularly as investors have only recently heard from the Federal Reserve which is firmly in the camp of expecting core inflation to remain higher than target for longer.
“GDP growth for the first quarter has been confirmed at 2.1%, up from 1.6% previously but more closely aligned to the advance estimate first set out. This was primarily due to a downward revision to imports, which was partly offset by a downward revision to consumer spending.
“The greater focus remains on inflation, with headline inflation rising to 4.1% in the 12 months to May, up from 3.8% in April and the highest level since 2023. Meanwhile, core PCE inflation for May came in at 0.3% month-on-month and 3.4% year-on-year, a notch higher than the 3.3% recorded in April. Putting volatile oil prices to one side, this reinforces the view that underlying inflation is still running too hot for comfort, with sticky wage inflation in the service economy a major driver.
“The key challenge for policymakers continues to be the resilience of the US labour market. Employment remains close to full capacity, driving wage growth of around 3.4% and preventing core inflation from coming down more quickly. The Fed has already turned reasonably hawkish in the face of this, with the market anticipating one to two rate hikes by year end.
“Although lower energy prices should help bring headline inflation down over the coming months, policymakers are far more concerned with the underlying trend in core inflation. Until there are clearer signs of labour market weakness and easing wage pressures, the case for interest rate cuts is likely to remain some way off.”
