May 2026 inflation: Core PCE 3.4%, core CPI 2.9%

In May 2026 the Personal Consumption Expenditures price index excluding food and energy (core PCE) increased 3.4% year over year. The Consumer Price Index excluding food and energy (core CPI) rose 2.9% year over year. Both readings stayed above the Federal Reserve’s 2% inflation target.

The Federal Open Market Committee left the target range for the federal funds rate unchanged at 3.50%–3.75% at its fourth meeting of 2026. The committee’s post-meeting statement read: “Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy,” and added that it “will deliver price stability.”

Market pricing on the CME FedWatch tool implied about a 70% probability that the Fed will keep policy unchanged at the next meeting and roughly a 30% chance of a 25 basis-point increase.

The PCE measure is compiled by the Bureau of Economic Analysis and uses a chain-weighted formula that captures changing consumer behavior and a wider set of spending. The CPI is produced by the Bureau of Labor Statistics, uses a fixed basket of goods and tracks out-of-pocket prices paid by consumers. Core PCE is generally less volatile than core CPI.

Since 1960 core CPI has posted a higher reading than core PCE nearly 80% of the time and on average about 47 basis points higher. The relationship shifted in November 2025 when core PCE rose above core CPI and remained higher through May 2026, with PCE about 56 basis points above CPI in the latest comparison.

Both indexes surged during the COVID-era inflation spike: core PCE peaked at 5.57% in February 2022 and core CPI reached 6.63% in September 2022. Both have fallen from those peaks but have not returned to the 2% policy target.

Core inflation measures exclude food and energy because those categories often move sharply month to month and can obscure underlying price trends. Households continue to face food and energy costs in everyday spending.

Policymakers will continue to review a range of core inflation measures and other economic indicators at upcoming meetings to assess whether policy settings require adjustment.