Inflation report could fuel concerns about higher interest rates, even as oil prices fall

EconomyNew inflation report could fuel concerns over higher interest rates, even as oil prices fallThe Personal Consumption Expenditures index is the Fed’s favorite gauge of price increases.Listen to this article with a free account00:0000:00Grocery shopping in Arlington, Va., on June 10.Li Rui / Xinhua via Getty ImagesShareAdd NBC News to GoogleJune 25, 2026, 5:00 AM EDTBy Rob WileA closely watched inflation report is set to reveal how much price growth picked up in May — and whether many American consumers remain mired in an affordability crunch. Limited time: Save 25% on NBC News subscriptionGet exclusive reporting, live Q&As and ad-free reading.Wall Street forecasters expected the pace of personal consumption expenditures (PCE) to have quickened compared with April data amid higher oil prices and stronger consumer spending. The monthly PCE report is the Federal Reserve’s preferred inflation gauge. New Fed Chairman Kevin Warsh has said the central bank is committed to bringing inflation back to its 2% target — a level it has failed to reach for the past five years. Wall Street now anticipates the Fed will raise its key interest rate at least once by year’s end in a bid to counteract the stronger price growth. By making it more expensive to borrow money, the Fed slows overall economic activity and, with it, the pace of price increases. “Thursday’s PCE is set to take on greater importance for markets, especially since Federal Reserve Chair Warsh was emphatic in last week’s meeting about the central bank’s desire to achieve price stability, and this PCE reading could affect the market’s rate hike expectations,” Rick Gardner, chief investment officer at North Carolina-based RGA Investments, said in a statement.Until Wednesday, the direction of key interest rates had begun to decouple from that of oil prices, an unusual setup given they tend to rise together as dual threats of worsening inflation.But things got back on track Wednesday, as oil prices hit new postwa...