The Federal Reserve’s preferred gauge of inflation rose slightly in June, according to new data from the Commerce Department released Friday.
The personal consumption expenditures (PCE) price index rose 0.1 percent last month and 2.5 percent over the past year. Core PCE, which excludes more volatile food and energy prices, was up 0.2 percent in June and 2.6 percent year-over-year.
The latest inflation reading comes as the Fed is set to meet next week. The central bank has held interest rates steady at a range of 5.25 to 5.5 percent for the past year, as inflation has remained stubbornly above its 2 percent target.
After peaking at a 40-year high in mid-2022, inflation has eased significantly. However, recent inflation data has showed halting progress, especially in the first quarter of 2024.
With several better inflation readings in the second quarter, Fed Chair Jerome Powell said earlier this month that the central bank is gaining more confidence that inflation is sustainably moving toward 2 percent.
“I would say we didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter … do add somewhat to confidence,” Powell said during remarks at The Economic Club in Washington, D.C., in mid July.
Another measure of inflation, the consumer price index (CPI), has also shown further signs of easing in recent months. The CPI fell 0.1 percent in June, marking the first time that consumer prices have fallen month-to-month since the pandemic.
At the same time, the labor market appears to be cooling, fueling hopes of interest rate cuts. The unemployment rate ticked up slightly to 4.1 percent in the June jobs report, and the Labor Department made significant downward revisions to April and May’s job gains.
Even as inflation is easing and the job market is cooling, the U.S. economy has remained remarkably strong. Gross domestic product (GDP) grew at an annualized rate of 2.8 percent in the second quarter, coming in well above economists’ expectations, according to data released Thursday.
