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US core PCE inflation slows as energy risk looms
The Fed’s preferred core PCE rose 0.1% month over month in June, while real personal consumption expenditures increased 0.4% and annual core inflation eased to 3.3% from 3.4%.
The Federal Reserve’s preferred inflation measure, core PCE inflation, continued to moderate in June even as higher energy costs remained a risk to the outlook, according to Action Forex. The core PCE price index, which excludes food and energy, rose 0.1% month over month, below expectations of 0.2%. Annual core inflation eased to 3.3% from 3.4%.
The broader PCE picture also pointed to ongoing disinflation. The headline PCE price index fell 0.1% month over month, matching expectations, and annual inflation slowed to 3.7% from 4.1%. Action Forex said the report supports the view that underlying price pressures are cooling.
Action Forex also highlighted consumer spending and the question of how energy price moves could affect future inflation. Personal income increased 0.2% month over month and personal spending rose 0.3%, with real personal consumption expenditures up 0.4%, indicating households continued to support growth despite tighter financial conditions.
For the Fed, Action Forex noted the data offer evidence that core inflation remains on a disinflationary path, but policymakers may be cautious because the report is backward-looking. The key issue now, the outlet said, is whether the recent oil shock proves temporary or starts influencing wages, services inflation, and inflation expectations.