Fed’s Preferred Inflation Measure Cooled Overall in June

The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index, showed a slight cooling in June. This is good news for the central bank, as it has been grappling with rising inflationary pressures in recent months.

The PCE price index rose by 0.4% in June, slightly lower than the 0.5% increase seen in May. On an annual basis, the index increased by 3.5%, down from the 3.9% rise in May. This moderation in inflation is likely to provide some relief to policymakers at the Federal Reserve, who have been closely monitoring price pressures in the economy.

One of the key drivers of the moderation in inflation in June was a slowdown in the price increases for goods. The price index for durable goods, such as appliances and electronics, rose by just 0.3% in June, down from the 1.1% increase seen in May. Non-durable goods, such as clothing and food, also saw a slowdown in price increases, rising by 0.3% in June compared to a 0.6% increase in May.

Meanwhile, the price index for services, such as healthcare and housing, continued to rise steadily, increasing by 0.4% in June. This is consistent with the broader trend of rising prices for services in the economy, driven in part by labor shortages and supply chain disruptions.

Overall, the moderation in inflation in June is a positive sign for the economy, as it suggests that price pressures may be starting to ease. However, policymakers at the Federal Reserve will continue to closely monitor inflation data in the coming months to determine if further action is needed to keep inflation in check.

The Federal Reserve has already indicated that it is prepared to raise interest rates if inflation continues to rise above its target level of 2%. The cooling of the PCE price index in June may provide some breathing room for the central bank, but policymakers will remain vigilant in their efforts to ensure price stability in the economy.