PCE price index, one of the key inflation measures, kept cooling in June


This latest release aligns with the Fed’s target to reach 2% inflation

The personal consumption expenditures price index excluding food and energy increased just 0.2% in June from the previous month, the Commerce Department said Friday. On a year-to-year basis, the core PCE rose 4.1%, the slowest annual rate since September 2021. It marked a decrease from the 4.6% annual pace in May.

Headline PCE inflation including food and energy costs also increased 0.2% on the month and rose 3% on an annual basis. It was the lowest yearly rate since March 2021, down from 3.8% in May.

This latest reading strengthens the general idea that  prices have slowly begun to ease.  Other readings such as the consumer price index earlier this month are also showing a slower rise in inflation. Meanwhile, consumer expectations are also coming back in line with longer-term trends. Personal income rose 0.3% while spending rose 0.5%. Income came in slightly below expectations, while spending was in line. 

The PCE indices are part of the Personal Income and Outlays report, which provides a more comprehensive look at shifts in prices, including how consumers respond to them and how much consumers are spending, bringing in and saving.

The report comes two days after the Fed announced a quarter percentage point interest rate increase, its 11th hike since March 2022.

Recent inflation and employment data show slowing price growth and more moderate hiring. However, persistently-robust consumer spending kept inflation running above the 2% target, cutting against the Fed’s strategy. 

During his press conference on Wednesday, Federal Reserve Chairman Jerome Powell further emphasized the importance of a “data-informed” approach to future rate hikes. The goal, he said, remains to restore price stability, which will “require a period of below-trend growth and some softening of labor market conditions.”