June PCE data meets expectations but remains above the Fed’s 2% target, easing pressure for immediate rate hikes.
The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures Index, rose 3.7% year-over-year in June, down from 4.1% in May and matching forecasts. Core PCE, excluding food and energy, increased 3.3%, a slight decline from 3.4% in May and in line with expectations.
Month-over-month core PCE rose just 0.1%, below the 0.2% forecast and down from 0.3% in May. The slowdown follows a drop in the Consumer Price Index, with core CPI falling to 2.6% in June from 2.9% in May, driven partly by a near 10% decline in gasoline prices.
Despite the cooling, inflation remains above the Fed’s 2% goal. Recent geopolitical tensions, including US-Iran clashes, have pushed energy prices higher, raising concerns about renewed inflationary pressures. The Fed held rates steady this week, though three regional presidents dissented, favoring a 25-basis-point hike.