U.S. Core Inflation Rises to 2.7%, Challenging Claims of Continued Decline

Washington D.C. – New data released by the Commerce Department indicates a recent uptick in underlying inflation, with the core Personal Consumption Expenditures (PCE) price index rising to an annual rate of 2.7% in May. This development comes amidst ongoing scrutiny of the Federal Reserve's monetary policy and has drawn sharp criticism from political figures, including U.S. Senate candidate Bernie Moreno, who questioned Federal Reserve Chairman Jerome Powell's recent testimony regarding inflation trends.

The Commerce Department's latest report revealed that while overall inflation, as measured by the PCE price index, grew more modestly at 2.3%, the core PCE, which excludes volatile food and energy prices, unexpectedly accelerated. This contrasts with earlier Federal Reserve reports, such as the Monetary Policy Report submitted on June 20, 2025, which noted that "inflation has continued to ease," with the 12-month PCE at 2.1% in April. However, the Fed's own updated projections for 2025 now anticipate core PCE inflation to reach 3.1%, an increase from their March forecast.

Federal Reserve Chairman Jerome Powell, testifying before the House Financial Services Committee earlier this week, acknowledged the potential for tariffs to impact consumer prices. He stated, "we should start to see this over the summer, in the June number and the July number...If we don't we are perfectly open to the idea that the pass-through (to consumers) will be less than we think." The central bank has maintained its benchmark interest rate at 4.25%-4.50% since December, citing a cautious "wait-and-see" approach to ensure inflation durably returns to its 2% target.

The latest inflation figures and the Fed's cautious stance have intensified political debate. Bernie Moreno, a U.S. Senate candidate, took to social media to express his concern, tweeting:

"Federal Reserve just published its inflation report and it shows that inflation continues to drop even further. Did Chairman Powell know that two days ago when he testified? His dishonesty and partisanship is costing our nation and its citizens hundreds of billions. Resign." This sentiment echoes President Donald Trump's repeated calls for lower interest rates. Despite the mixed signals, investors initially reacted to a drop in personal spending and income in May, boosting hopes for more aggressive Fed rate cuts this year.

The divergence between recent inflation data and the Fed's previous assessments, coupled with the ongoing impact of trade policies, sets a complex stage for future monetary policy decisions. Fed officials will closely monitor upcoming consumer price and jobs reports through the summer to determine if the current inflationary pressures are transitory or signal a more persistent trend. The path forward remains uncertain, with potential implications for both economic growth and the political landscape surrounding the central bank.