Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTDiccon HyattWed, June 24, 2026 at 7:18 PM GMT+2 4 min readGas prices are displayed at a Mobil gas station on June 22, 2026 in Los Angeles, California.Credit: Justin Sullivan / Getty ImagesKey TakeawaysThe Federal Reserve's favorite measure of inflation likely rose to its highest in nearly three years in May.Accelerating price increases in consumer products could put pressure on the Fed to raise interest rates at its next meeting in July to combat inflation.The Federal Reserve's preferred measure of inflation likely surged in May, putting the central bank's determination to keep prices stable to the test.Forecasters expect Thursday's Personal Consumption Expenditures price index to show inflation rose 4.1% over 12 months ending in May, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. That would be up from a 3.8% in April and the highest since 2023.The uptick would largely reflect rising gasoline prices due to the war in Iran that month, which have since begun to decline following the signing of a peace agreement.However, core prices— which exclude volatile food and energy costs and are regarded by economists as a better indicator of persistent inflation trends—are expected to have risen 3.4% over the year, up from a 3.3% annual increase in April. That would make it the highest mark for the core index since October 2023.What This Means For The EconomyThursday's inflation report is highly anticipated in financial markets and could heavily influence whether the Federal Reserve raises interest rates or not at its next meeting in July.The rise in core inflation is especially important for the Fed because the core PCE price index is the Fed's benchmark for whether inflation is running at its 2% annual target. That measure has been above the goal since 2021.Rising core inflation could put more pressure on the Fed to use its main inflation-fighting tool: increasing the fed funds rate, which influences borrowing costs on all kinds of loans.As of Wednesday, financial markets were pricing in a 34% chance the Fed would hike rates at its next meeting in July by a quarter- point, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data.Thursday's report could shift those odds one way or the other if it comes in higher or lower than expected. In recent communications, a growing number of Fed officials have signaled concerns about rising inflation and warned that rate hikes could be on the way this year.Before the Iran war, several price trends were more favorable.In particular, housing inflation, which spiked during the pandemic, has been cooling, leading to a drop in core inflation toward the 2% target. Financial markets had widely expected the Fed's next move to be a rate cut to stabilize the shaky-looking job market. However, tariff-related price hikes last year, combined with the war in Iran's disruption of supply chains, have stoked concerns about a fresh round of high inflation.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info