The latest reading from the Fed’s inflation indicator showed prices rose slightly more than expected in June.
The core Personal Consumption Expenditures (PCE) index, which excludes the cost of food and energy and is closely watched by the Federal Reserve, rose 2.6% in June from a year earlier, above economists’ estimate of a 2.5% increase and unchanged from the previous month. Still, the print marked the slowest annual increase for core PCE in more than three years.
Core PCE rose 0.2% from the previous month, in line with Wall Street expectations of 0.2% and faster than the 0.1% increase in May.
“It’s more evidence for the Fed to say that the increase that we saw in inflation in the first quarter was largely an aberration,” Michael Gapen, head of U.S. economics at BofA Securities, told Yahoo Finance. “It hasn’t broken the trend of disinflation. Inflation appears to be gradually coming down in the direction that the Fed wants.”
Kathy Bostjancic, chief economist at Nationwide, described Friday’s PCE results as “favorable.” Bostjancic said the data provided “clear support” for the Fed to begin cutting rates in September.
The report follows recent promising inflation figures. The latest reading of the Consumer Price Index (CPI) showed core prices rose 0.1% from the previous month, below economists’ estimates.
Ahead of Friday’s PCE release, Federal Reserve Chairman Jerome Powell noted recent inflation numbers:[adds] “some confidence” inflation is moving toward the Fed’s 2% target. The Fed’s next monetary policy decision will come on July 31.
Markets generally expect the Fed to leave interest rates unchanged at its July meeting before delivering its first rate cut in September.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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