In May, U.S. PCE rose 4.1% year-over-year, and core PCE rose 3.4% year-over-year. The numbers didn't blow up, but they confirmed one thing: inflation is not a passing breeze; it has returned to the highs seen since 2023, and the bigger problem is the structure.

The oil price shock is of course a clear signal—as tensions rise in the Middle East, energy prices push the data up first. But what the market really fears is that even after oil prices fall, the core components won't come down. Service prices, commodity costs from tariffs, and demand for tech hardware driven by AI investment are all prolonging inflation stickiness.

Williams' remarks made this point very clear: inflation returning to 2% may have to wait until 2028. Translated into market language: don't rush to bring back rate-cut trades. The Fed is now more afraid of inflation recurring than of missing a chance to provide support.

So this data isn't purely bearish, but it stings. Because it nails down "higher rates for longer" back on the table.

Why is the dollar being seen as bullish again? The logic is not complicated: U.S. inflation is high, growth hasn't collapsed, AI capital continues to pile into U.S. assets, and the Fed has no room to ease. Money will be honest—it will first stand on the side of interest rate differentials and the growth narrative.

For risk assets, the pressure isn't whether May PCE exceeded expectations, but that the market needs to re-answer a question:

If the 2% target is delayed until 2028, why should high valuations enjoy easing early?

This is not good news for U.S. growth stocks, crypto assets, and all sectors that rely on liquidity narratives. Every subsequent rally may first need to pass the test of the dollar and interest rates.

Meeting expectations does not mean the pressure is gone; if inflation hasn't turned the corner, easing is hard to truly return.

‍$BTC$XAUUSD $MU