The Personal Consumption Expenditures index — the Federal Reserve’s preferred inflation measure — rose at a 4.1% annual rate in May, highlighting the central bank’s challenge in reining in prices.

The reading matched economists’ forecasts for the PCE report to come in at 4.1% annually, according to financial data service FactSet. That compares with an annual increase of 3.8% in April, and represents the highest level since April 2023.

Core PCE, which strips out volatile energy and food prices, rose 3.4%, slightly higher than the 3.3% forecast by economists. 

The Iran war reignited inflation by driving up oil and gasoline prices, leaving American drivers paying the highest fuel costs in three years.

May’s PCE report could mark the peak of the latest inflation surge because crude oil prices eased in June amid hopes that the Strait of Hormuz, the key Persian Gulf waterway that handles 20% of global oil flows, could soon reopen. That drop in energy costs isn’t reflected in the latest PCE data, analysts noted. 

“It’s our expectation that inflation will start going lower now that the Strait of Hormuz has reopened and oil prices are coming down, so that may alleviate some of the pressure on the Fed, but next month’s data needs to be lower than what we are seeing today if that is going to be the case,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management, in an email.

Earlier this month, Federal Reserve Chairman Kevin Warsh vowed to tackle inflation, saying at his first interest-rate decision meeting that the central bank is determined to lower inflation to 2% annually.