The Fed’s target is 2.0 percent, actual is 4.1 percent, up 0.4 percent from last month.
The BEA’s Income and Outlays report shows the PCE Price Index is up 0.4 percent from last month and 4.1 percent from a year ago.
Five Measures of Inflation Year-Over-Year
- CPI: 4.25
- Core CPI: 2.85
- CPI Rent: 2.92
- PCE: 4.07
- Core PCE: 3.41
I calculate to two decimal places, the reports rounds to one decimal place.
PCE Inflation Detail Month-Over-Month
PCE Month-Over-Month Percent Change
- PCE: 0.45 percent
- PCE Goods: 0.44 percent
- Core PCE: 0.32 percent
- PCE Services: 0.45 percent
PCE Year-Over-Year Detail
PCE Year-Over-Year Percent Change
- PCE: 4.1 percent
- PCE Goods: 4.8 percent
- PCE Services: 3.8 percent
- Core PCE: 3.4 percent
The PCE was last under 2.0 percent in February of 2021, 63 months ago.
The Main Question
The main question is less whether both headline and core go up—they are widely expected to—but rather how “stale” these numbers already are.
Specifically, the consensus forecast is for monthly headline inflation to edge higher from 0.4% to 0.5%, with the annual rate rising from 3.8% to 4.1%. Monthly core is expected at 0.3% (from 0.2%) and the annual rate at 3.4% (from 3.3%).
These numbers come before the recent sharp fall in oil prices, which will result in lower headline inflation and ease some of the pressures on core. The question being debated is by how much, including whether May will prove to be the peak inflation month.
Looking Ahead
Goods inflation is going to drop substantially due to falling gasoline prices.
However, services are 65 to 70 percent of the PCE price index. If medical care services and housing are elevated, the disinflation will be less than most expect.
On a year-over-year basis, the next four months are neither difficult nor easy to beat. It’s not until January of 2027 before year-over-year comparisons become easy to beat.
By January 2027, anything can happen ranging from mild stagflation to a disinflationary recession crash.
Consumer and Corporate Spending Buoyancy
- Much buoyancy in consumer spending comes from the stock market.
- Much buoyancy in corporate spending is related to AI.
- Completing the circle, AI is fueling the stock market, trucking and other things.
Expect housing to remain in the gutter. And expect hiring to be weak.
Effectively, the economy is firing on one cylinder: AI. But it’s a big cylinder.
So, a key question is “Where does AI take us?” But no one can say for sure.
Other Factors
AI is not the end of it. The war in Iran can easily break out again. But that’s not my expectation.
In contrast, I expect Trump is highly likely to make matters worse with tariffs. Notably, the USMCA deal has a joint review on July 1.
I will discuss USMCA in a separate post, but even if the war is settled, there is plenty of room for Trump to make matters worse elsewhere.
I think we know most of the numbers on the dice, even the likelihood of some question marks. However, we don’t know the outcome of the roll.
Related Posts
June 23, 2026: Oracle Cuts 21,000 Jobs to Fuel AI Push, Warns of Soaring Costs
- Oracle’s head count drops 13% according to latest annual report. Many Risk Warnings
June 24, 2026: Trump’s Demand on SAVE Act Makes Passing Any New Reconciliation Bill Difficult
Trump insists the SAVE Act be part of a new reconciliation bill.
June 25, 2026: New Home Sales Drop Another 7.3 Percent, Builders Struggle with Rising Inventory
Sates are down. Inventory is high and rising, pressuring builders.
How long we can fire on a single cylinder remains to be seen.
Demand deposits plus currency have increased by 1419.4b while M2 has increased by 1006.5 since last June. I.e., there has been a shift in deposit classifications and a flight to safety changing the composition of the aggregates. These are spendable balances and should propel the economy forward.
Demand deposits as a percentage of M2 stood at 10 percent in February 2020. By May 2026 demand deposits stood at 30 percent of M2. That shift has activated monetary savings. That has kept the economy afloat as time deposits represent frozen savings. I.e., banks don’t lend deposits.
Reserve balances (the correct interpretation)
From the grounded H.4.1 data:
Reserve balances July 2025: ≈ $2.93 trillion
(from the July 2025 H.4.1 tables)
Reserve balances June 2026: ≈ $3.56 trillion
(from the June 17, 2026 H.4.1 release)
Increase in reserve balances
≈ $625 billion increase in total reserves (reserve balances) since July 2025
Not to worry.
I have been promised by those in authority the inflation is transient.
Perhaps the Fed should look up the definition of “Transitory”…
I think its pretty clear after 5 years that the 2% target is not for real
What they worry about is debt/gdp, the oligarchs, and the bond market being happy
The 2% BS is to keep the minions believing that it pays to work hard and that their work output wont be confiscated by our overclass of leeches- haha
/s: Democratic socialism will solve it! – more HAHa!!!!!
Socialism is not the problem. The problem is the war machine.
Everyone has a hand out to the government. Socialism is a term used when someone else is on the receiving end.
Inflation target planning would make Stalin proud! But sure it ain’t socialism. No, sir! /s
2percent is a target. the ability to make that target again may not be.
Its a scam. 2 percent allows the government to spend money. Military / social programs / tax cuts etc. joe smoh on the street can never catch up. Soon as he gets a raise he still is 2 percent behind.
Some people benefit. Those with assets and those on the dole. .
Trump wants to throw a wrench in the system so he can call off the elections.
keith self proposes to overturn the 17 th amendment. So i guess texas is worried about losing the senate. Saw some post from trump saying the communist are making their move.
This is a deeply embedded syndrome in our democracy (people vote without exception for “free stuff” and its political enablers). We have met the enemy, and it is us. Our leaders wave around their customary carrots and sticks, heedless of the inevitable costs dumped back upon us.
One might think Trump as a touted businessman would so things differently, but he is infinitely more salesman than chief finance or risk officer. He loves debt and used bankruptcy as a tool. But that is no excuse for all others.
80% of the problem are “senior” leeches on social security and medicare. The other 10% of the problem is military waste/spend. The remaining 10% is everybody else’s handouts.
Just read an article about taxing people more to fill the holes in social security. Gee, I thought those leeches already “paid for it” so why are taxes going up to keep SS solvent?
https://www.cnbc.com/2026/06/25/social-security-why-some-washington-lawmakers-want-to-tax-high-earners.html
Let’s see, take money from working people and families and hand it to useless leeches. And we wonder why this country is so screwed up?
those are rounding errors to our world wide bases that try to bomb the poorest folks on planet who dare to trade with anyone we don’t like. the result of that are little incidents like 9.11.01. how many trillions are wasted on our empire and blowback events like idiotic wars and guarding the worst humans on planet earth……….
Thomas Massie has introduced a budget amendment to strip $3.3 billion in funding for the IDF from the federal budget.
I love the idea of each member of the House having to be on the record as voting for or against this proposal.
https://responsiblestatecraft.org/massie-israel-aid-congress/
aye aye. operation epstein fury has backfired into military defeat and epstein files are gonna be made public and israel has now become a pariah in usa like it has long been in rest of the world. pederast trumpstein did the world a favor by showing how vile zion truly is. genocide joe gets silver medal in that, too.
Damage To Key US Bases In Gulf So Extensive The Pentagon May Not Rebuild Them. ZH.Know when to hold them, and know when to fold them. Hat tip to Kenny Rogers
US considers moving Gulf bases west
https://www.timesofisrael.com/us-considering-moving-gulf-bases-hit-by-iran-westward-including-to-israel-report/
There is no difference between dems social programs and the rep tax cuts. Both contribute to the debt. Least the people get something out of dem programs. Trumps policies / stock trades and favoritisms etc. well hes just a republican out in the open. Imo a lot of our issues stems from Regan policies. I wonder where we would be now if we had the same tax brackets all along.
Democrats don’t even do social programs. They’re just republicans with preferred pronoun tags on their email sigs.
ronnie raygun was a con man. lifetime pitchman for GE. tripled the debt and doubled the MICC spending during the greatest peacetime the world had ever seen. anyone who voted for raygun is a moron. like 9.11.01 WMD dumb.
Ah, his defense program also led to the collapse of the Soviet Union and the final discrediting of socialism among people who can read and write (and think). I wouldn’t call that a trivial accomplishment. I’m not minimizing inflation, but I think you have to put military necessity first.
One thing that bothers me is that the Communist Party of the Soviet Union may originally have been a holding company set up by American businessmen. Now American business seems to be trying to take over Russia again, using the lives of Ukrainians who do have good reason to hate Russia.
Hey now…settle down! We need you kids to keep pursuing your dreams. You deserve a new car, maybe granite countertops…certainly the newest IPhone. If you start feeling down maybe get another tattoo?
Regardless, get out there and spend, spend, spend!
The irony of your statement is that’s exactly what boomers are going out and doing with “their” social security money which is really code for every working person’s money. The joke will be on boomers when you run out of other people’s money and they have to eat cat food to get by…
the last thing in the world to worry about is amerikans going hungry. i am assuming you are just being humorous. no doubt you are correct. the boomers and silent generation are the biggest brats the world has ever known. that part i agree. the ww2 generation was also given life on a silver platter. all those great freebies like VA loans………village idiots could live large post ww2 until about 1990s…….
The World War Two generation and the baby boomers were NOT given life on a silver platter. A lot of baby boomers may have developed bad political ideas, but a lot of those ideas came out of Christianity and World War Two propaganda. Kids nowadays do not get it easy economically – the baby boomers had easier times getting jobs – but they live with luxuries that were not even imagined in year 1950.
I should have added that the invention of those luxuries can be attributed to military necessity and freedom of enterprise, which you call capitalism.
Nah. It’s all caused by GenXers and Millennials on disability because they are too depressed to be able to work.
What do you expect from a system that was designed to eventually have one working person support 2 or 3 (or more) useless eaters.
The only thing I expect is for these programs to be shut down. It’s a ponzi scheme joke of which we all know should go bankrupt in 5 years but I am sure politicians will tax everyone more to keep the scheme running and make both young and old miserable anyway.
I don’t believe that they will raise the taxes.
I believe that they will borrow and print the money.
Which in the long run will be much much worse that raising taxes.
they are just gonna tweak it like raygun did. this time they will just lift the max limit to tax like medicare payments. the hole will be plugged. amerika like much of rich world is a plush life. the only question is how many toys and uber eat deliveries to cut back on………if inflation persists for another decade……………crumbling evil empire won’t be so bad. USSR crumbled and 1990s in russia was not so bad. saw it with my own eyes.
1970s again. insert trump for nixon. only difference is the amerikan empire is much weaker now. internally and on the war front with all our bases at risk worldwide. crumbling evil empire 101. a positive thing for most of mankind including most amerikans, too. democracy works. the folks here voted for all this.
You sound a lot like the reincarnation of either bmcc or Abbie Hoffman!
You figure he’d stop sounding like a 70 year old Russian guy when he’s posting on his alt but I guess not
Maybe you’re thinking of Alx? I was thinking of bmcc. I actually liked both of them, they always had something interesting to say!
Inflation has been increasing for the past 4-6 months. The Fed can no longer let it drift lower. The Fed needs to raise rates sooner than later.
Its well past the time for the Federal Reserve to recalibrate and set the annual inflation target to 3%.
Adjusting the rhetoric, moving the goal posts — what does that do? I, for one, have severe goal post whiplash in all fields.
“Goods inflation is going to drop substantially due to falling gasoline prices.”
Questionable. Empty strategic reserves need to be replenished. Oil and fertilizer will not be coming out of the Gulf at pre-February levels for a long time, even assuming the MOU avoids Bibi blowing it up.
guaranteed for a month
“Empty strategic reserves need to be replenished. Oil and fertilizer will not be coming out of the Gulf at pre-February levels for a long time, even assuming the MOU avoids Bibi blowing it up.”
I see the US-Iran deal blowing up in the next week or two. The US has not fulfilled many of its commitments under the MoU (like the return of $12.5B in frozen funds upon signing and ending the bombings in Lebanon). After Iran has taken sufficient advantage of the removal of sanctions on the sale of its oil and replenished its drones and missiles, they will declare the US in breach of the MoU. Not sure whether that will result in the Strait being closed again, but it is Iran’s strongest leverage, so seems likely to happen.
Who on earth thought that the United States would ever fulfill any of its promises?
Looks like the MOU has already started to blow up, with attacks launched in both directions. I don’t think the Strait will stay open much longer.
Either side has incentives to breach, and ours particularly has credibility degraded beyond reach. Trump has shown he is tied to fecklessly trying to manipulate domestic political appearances, versus factual realities. Luckily gas pumps don’t lie. But this is bouncing around with all sorts of other apparitions in that psychedelic, kaleidoscopic brain of his. the upshot is the default: inflationary.
I thought this wasn’t our Suez moment, that such talk was fabulist and alarmist, but Trump is stumbling and fumbling it all toward that.
For 62 months in a row, the Fed has missed its anointed 2% inflation target. Since March 2021. And now getting worse! Do they get some kind of demerit for that? No, no. Everyone should still hang on their every utterance as if they were wise.
Economists are the worst prognosticators of almost any profession, yet for some reason they are very highly paid and people hang on their every word. Madness.
Econn tried so hard to be a quantitative science. It has such pretty equations. But it fails several tests of the scientific method. One cannot get a clean isolated experiment, and it is not reproducible.
Bit somebody must make a call on money and credit supply.
It is the herd mentality at the root of the consistent failure of economic predictions. Like cattle, economists like to run with the herd and don’t want to stray too far from everyone else.
https://political.org/2026/05/19/bias-laziness-and-fear-why-economists-keep-getting-their-forecasts-wrong/
Fortunately, there are exceptions; people who have the courage to post their unpopular views regardless what other people think. Mish is one of them, which is the reason I am here.
economics has always been a soft science. was in philosophy departments of universities for centuries. properly. modern folks have been fooled.
i learned the lesson as a teen at the racetracks. the horse touts and con men were a great lesson for my wall street life. amerika is a grifter empire. always has been. it’s what it is all about. since day 1. just land grabs and flim flam artists.
You should realize that economics as we know it has been taken over by the deceivers, who I call priests. If you want to learn about real economics, read up on the Austrian school. People who like to play around with statistics may be good mathematicians, but they are not economists. They might be able to SERVE economists, the way an auto mechanic serves a person who drives a vehicle for work.
Well some goods will drop but Apple stock is down 6% today on news that it will have to raise prices as ram, storage and other computer component costs are soaring. AI demand is one reason but I think it goes beyond that. I will be shocked if others don’t follow suit and raise prices across the board.
I also think the oil situation won’t be sorted out as many people think. Ukraine continues to blow up Russian oil infrastructure. Iran supposedly fired on a ship today in the Strait. Oil infrastructure still blown to bits from the last war.
There are too many variables and too many things that can go wrong so my bias is for higher inflation until we get a demand collapse.
We can all agree on one thing…
Do worry, Trump & Walrus will find a way to make things even worse.™
I had dinner at a fabulous Michelin restaurant tonight so I’m awarding 1-star Mishelin to this post to complement my meal.
Well said.
Out of curiosity how were the prices compared to other restaurants serving similar food. Outlandish or inline?
The total bill was $140 (including tip) for two people. This included a shared appetizer, 2x main meal, and shared desert and a couple of drinks. The desert was comped by the restaurant which would have added another $15. We also got a free appetizer in addition to the one we ordered.
The meal was excellent.
That’s very reasonable!
I was a bit shocked to be honest, I usually spend $400 at Michelin restaurants for 1 or 2 people.
The Fed is a bunch of rich people who really will not care about inflation until the guillotines are rolled out into the town squares. This is what my grandchildren tell me. They are being radicalized by the circumstances that they perceive as their lot in this economy. The latest election results in NYC seem to reflect this. How do we fix this. I rather like having my head attached. I am certain that most do.
I always said pitchforks and torches but losing one’s head has a more disturbing and distinctly french macabre feel to it. As MPO45v2 tells us on one hand how bad things are and on the other hand how he’s wealthy beyond all recognition his comments illustrate where your grandchildren’s mindset is. It’s not that they are new to despise wealth and power, as the young are wont to do, but that the 17 years of theft from the US Treasury since the GFC to buttress up overpriced/leveraged real estate, government largesse, corporate profits and outsized market returns is now an entrenched mindset of wealth entitlement that has extended beyond the 1929 shoeshine boy. If I hear one more baby boomer tell me “we can’t let the stock market go down” or “we can’t let home prices crash” as if they are entitled to the outsized passive gains I think I’ll start passing out the pitchforks and torches myself. Pigs get fat, hogs get slaughtered. I don’t want to be a pig but I surely don’t wanna be a hog.
It’s not that they despise wealth and power per se, it’s that they recognize that the game is rigged, and not in their favor.
It is abundantly obvious that we live in an oligarchy and that the oligarchs could not care less about people like your grandchildren.
From their perspective “Burn it all down!” is entirely rational.