Federal Reserve's Inflation Measure Shows Gradual Cooling in June, Supporting Potential Rate Cut

The Federal Reserve's inflation gauge eased in June, signaling a potential rate cut. Core inflation remained steady, supporting a future reduction.

The Federal Reserve's favored gauge of price increases proceeded to decrease gradually in June, while a "core" inflation measure remained steady. This is likely to prompt the central bank to pursue a rate reduction later this year, without creating any immediate pressure for a cut at its upcoming meeting.

Inflation Figures

The Personal Consumption Expenditures (PCE) index showed a 2.5 percent rise in June compared to the previous year, a slowdown from May's 2.6 percent, aligning with economists' forecasts. However, a "core" price measure, which excludes food and fuel costs to provide a more accurate reflection of the underlying inflation trend, demonstrated more resilience. Core inflation remained at 2.6 percent year-on-year, consistent with the May figure. Additionally, both inflation measures experienced a slight uptick on a monthly basis.

Inflation's Trajectory

The report serves as a reminder that while inflation is considerably lower than its peak in 2022, it has not been entirely eradicated. This indicates that the Federal Reserve may still have some way to go in its efforts to maintain price stability.

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