Fed’s preferred inflation measure rose 4.7% in May, around multi-decade highs

A customer counts his cash at the register while purchasing an item at a Best Buy store in Flushing, New York.

According to a Commerce Department gauge closely watched by the Federal Reserve, inflation held at high levels in May, though the monthly increase was less than expected.

Core personal consumption expenditures prices rose 4.7% from a year ago but were 0.2 percentage point less than the previous month. The reading was expected to be around 4.8%.

The measure, which excludes volatile food and energy prices, increased on a monthly basis, but not as much as expected.

Headline inflation increased by 0.6% for the month, much faster than the April increase. The year-over-year inflation was the same as in April and down from March, which was the highest reading since 1982.

Consumer spending accounts for 70% of all economic activity in the U.S.

Personal income rose in May, ahead of the 0.4% estimate, but income after taxes and other charges, or disposable personal income, declined. Spending adjusted for inflation fell in May, but it was still up on a year-over-year basis.

Both goods and services prices were up from April.

The personal saving rate went up from the previous month.

The Fed is trying to control runaway inflation. Monetary policy is less effective at controlling the ups and downs of gas and grocery prices than policymakers think.

In the last few days, Fed Chairman Powell has said that he is keeping an eye on headline numbers and gas prices.

The consumer price index, which measures a broad range of goods and services and is more closely watched by the public, rose in May.

Unemployment claims fell to 231,000 for the week ended June 25. The decline from the previous period was 2000 and the increase was 1000.

The number of continuing claims decreased slightly from the previous week.