Support PCE inflation accelerates, rising Fed Pressure; GDP revised upward; Micron on record
US PCE inflation rose to 4.1% in May, strengthening expectations of further Federal Reserve tightening, while core prices also firmed. Revised first-quarter GDP showed resilient economic growth, supported by spending and AI-related investment. Meanwhile, Micron surged to a record high after beating revenue, earnings, and guidance forecasts.
PCE inflation rose to 4.1% in May and core PCE to 3.4%, increasing pressure on the Fed to keep policy tight or raise rates.
Markets now price in at least one Fed hike this year, with implied probabilities at 63.2% for September, 71.7% for October, and 81.5% for December.
US Q1 GDP was revised up to 2.1%, beating forecasts and underscoring resilience in consumption, tax-driven spending, and AI-related investment.
Micron jumped by 15.74% to a record high after beating revenue and EPS forecasts and signalling strong Q4 demand for memory-chip supply.
PCE Price Index rises above analysts’ estimates, increasing pressure on the Fed’s inflation containment
According to data from the US Bureau of Economic Analysis (BEA), the PCE Price Index accelerated from 3.8% in April to 4.1% in May on a year-on-year basis, in line with market expectations. This represents the highest level since April 2023, increasing pressure on the Federal Reserve (Fed) in its efforts to contain inflation. In turn, the Core PCE Price Index—which excludes the most volatile components, such as energy and unprocessed food—advanced from 3.3% to 3.4%, also in line with analysts’ forecasts. On a monthly basis, headline PCE rose by 0.4%, while Core PCE increased by 0.3%. For the Core PCE reading, the current level is the highest since October 2023.
While a significant decline in energy prices could ease pressure on headline PCE, rising prices for technology goods, fertilisers, and services could keep inflation difficult to reduce. Therefore, market participants have started to anticipate an interest rate hike at forthcoming Fed meetings. According to data from CME’s FedWatch Tool, market-implied probabilities show a 48.5% likelihood of a 25-basis-point interest rate increase at the September meeting, while a 50-basis-point hike is assigned a probability of 14.7%. For the October meeting, markets expect at least one interest rate increase with a probability of 71.7%, while for the December meeting, market-implied probabilities reflect at least one rate increase with a probability of 81.5%.
In addition, the BEA report showed that US personal income and personal spending remained strong, with monthly increases of 0.7% in both cases. However, US stock indices closed mixed: the Nasdaq 100 advanced by 0.75% to 29,440, and the Dow Jones Industrial Average increased by 0.14% to 51,926 points. By contrast, the S&P 500 index declined marginally by 0.01% to 7,357 points.
Figure 1. US PCE Price Index YoY (2023–2026). Source: Data from the US Bureau of Economic Analysis; figure obtained from Trading Economics.
US GDP for the first quarter is revised upward, beating forecasts
The US Bureau of Economic Analysis report showed that gross domestic product (GDP) growth advanced by 2.1% in the first quarter of 2026, according to the final revision, beating analysts’ expectations of a 1.6% increase. This reflects the strength and resilience of the US economy, despite rising inflationary pressures for domestic consumers. According to a Reuters report, spending appears to have improved, driven by large tax refunds, which contrasted with the sharp increase in gasoline prices. In addition, the report indicates that broader economic activity has been supported by a solid artificial intelligence-related spending, which has boosted business investment.
Micron reaches a new record high following a stronger-than-expected earnings report
Micron Technology (MU) reached a new record high of $1,213.56 following a market appreciation of 15.74%. This implies a market capitalisation of $1.37 trillion, making Micron the ninth-largest company in the S&P 500 index. This milestone was achieved after the firm surpassed market forecasts in its quarterly earnings report, exhibiting prominent growth rates in both sales and earnings.
The semiconductor giant reported revenue of $41.46 billion, comfortably surpassing the forecast of $35.69 billion. In turn, Micron posted earnings per share of $25.11, exceeding the estimate of $20.49. These results imply an impressive YoY growth rate of 345% in revenue and a 1,214% growth in EPS. In addition, Micron released stronger-than-expected expectations for the fourth quarter of 2026, as it disclosed that its customers had committed $22 billion to secure the supply of memory chips, according to Reuters.
