Will rising inflation in May force the Fed to change its strategy?

US inflation probably inched higher in May, offering scant evidence of extensive tariff-related repercussions that the Federal Reserve expects to become more apparent later in the year.

Ahead of the key figures on Friday and fresh off the Fed's decision this week to keep interest rates unchanged, Jerome Powell heads to Capitol Hill for two days of testimony in which he'll lay out the case, again, for the central bank's go-slow policy approach. The Fed chair is likely to emphasise that while rate cuts are possible this year, officials want more clarity on the economic impact of White House trade policy.

Economists see the personal consumption expenditures price index excluding food and energy-the Fed's preferred gauge of underlying inflation-rising 0.1% in May for a third month. That would mark the tamest three-month stretch since the pandemic five years ago.

US central bankers largely see the Trump administration's expanded use of tariffs putting upward pressure on prices, eventually. But their latest economic forecasts also show officials see weaker economic growth and higher unemployment this year.

Fed Governor Christopher Waller on Friday told CNBC that the inflation hit from import duties is likely to be short-lived, and he sees room to resume lowering borrowing costs as soon as next month. The Fed's next policy decision will come on July 30.

"The Fed's preferred gauge, core PCE inflation, likely rose just 2 basis points in May, a modest uptick that will offer little clarity about upside risks to inflation in coming months. That's likely to leave some Fed officials still balancing the two sides of its mandate, rather than shifting focus to upside inflation risks."

Along with May inflation data, government's report on Friday is projected to show a second month of modest growth in household spending on goods and services. The last two months included a steep downturn in sentiment, related in part to heightened anxiety about the possible impact on prices from higher tariffs.

Economists will also look to the report's personal income data to gauge the ability of consumers to continue spending. In the three months through April, inflation-adjusted disposable income growth averaged 0.6%, the strongest in more than two years. Other US data in the coming week includes May existing- and new-home sales, as well as two surveys of June consumer confidence.

On Thursday, the government will issue its advance economic indicators report that includes an initial estimate of the merchandise trade deficit for May.

In addition to Powell delivering Fed's semi-annual policy report-he testifies to a House panel on Tuesday and the Senate Banking Committee on Wednesday-a slew of other central bankers, including New York Fed President John Williams, hit the public speaking circuit.