The Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation closely watched by the Federal Reserve, rose by 2.5% in June from year-ago levels, according to data released by the Bureau of Economic Analysis (BEA). This increase was in line with expectations and marks the slowest pace of inflation in four months.
When volatile food and energy costs are excluded, the core PCE inflation index, which is the Fed's preferred measure of inflation, increased by 2.6% from one year ago, slightly above the forecasted 2.5%. On a month-over-month basis, the PCE Price Index increased by 0.1%, while the core PCE Price Index rose by 0.2%, both as expected.
Greg Wilensky, head of US fixed income at Janus Henderson Investors, commented on the inflation data, stating that while the inflation data was slightly worse than expected, it still provides what the Fed and the market need to keep the Fed on a path to a first cut to their policy rate in September.
The PCE measures and tracks changes for all domestic personal consumption, making it a key way to measure changes in purchasing trends and inflation. The rise in inflation has been a major concern for investors and policymakers, as it can erode purchasing power and potentially prompt the Federal Reserve to raise interest rates.