Underlying Inflation Cools Sharply in May, Strengthening Case for Fed Rate Cuts

The Federal Reserve’s preferred inflation gauges showed underlying price pressures easing in May, reinforcing the case for interest rate cuts later this year as price growth continues to drift downward.

The Personal Consumption Expenditures (PCE) price index, released Friday by the Commerce Department, rose 0.1 percent for the month, bringing the annual inflation rate to 2.3 percent, modestly higher than April’s 2.1 percent pace but still near the Fed’s 2 percent target.

The core PCE index, which excludes food and energy, rose 0.2 percent in May and 2.7 percent from a year earlier, unchanged from April. While some observers pointed to the…

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