U.S. inflation accelerated in May while labor market conditions improved, data released Tuesday showed, presenting a mixed economic picture that could influence Federal Reserve policy decisions affecting cryptocurrency markets. The Personal Consumption Expenditures Price Index rose 4.1% year-over-year in May, matching expectations but accelerating from 3.8% in April, while the month-over-month reading came in at 0.4%, below the forecast of 0.5% and unchanged from prior month.
Core PCE, which excludes volatile food and energy prices, held steady at the expected 3.4% year-over-year pace, ticking up from 3.3% previously. Initial jobless claims fell to 215,000 from 226,000 the prior week, signaling continued resilience in the labor market despite broader economic concerns. First-quarter gross domestic product growth rebounded sharply to 2.1% annualized, a significant upgrade from the previously reported 0.5%, suggesting the economy proved more resilient than initially estimated.
The data underscores the Fed's balancing act between combating persistent inflation and supporting employment, a dynamic that has created volatility in crypto markets sensitive to interest rate expectations. While core inflation remains above the central bank's 2% target, the moderation in monthly price gains and stronger-than-expected growth may reduce immediate pressure for additional rate increases, potentially supporting risk assets including cryptocurrencies.