The Federal Reserve has been keeping interest rates steady, waiting to see whether the recent inflation surge will be temporary. That decision carries more risk after yesterday’s update of the Personal Consumption Expenditures (PCE) index for May, which shows that pricing pressure is increasing for reasons beyond surging energy costs tied to the Iran conflict.

rose to a 4.1% year‑over‑year increase last month, the fastest pace in three years (blue line in the chart below). The view that energy costs have peaked—and will continue to fall—suggests that headline inflation will soon turn lower.

But yesterday’s release highlights that inflation pressures are still building for reasons unrelated to energy, giving the Fed less…