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PCE inflation in June 2024: | Real Time Headlines

The Fed's main inflation indicator rose 2.5% in June from the same period last year, in line with expectations

A key Federal Reserve indicator showed inflation slowed slightly in June from a year earlier, laying the groundwork for a widely expected interest rate cut in September.

The U.S. Commerce Department reported on Friday that the personal consumption expenditures price index rose 0.1% this month and 2.5% from the same period last year, in line with Dow Jones forecasts. The annual gain was 2.6% in May, while the monthly indicator was unchanged.

Fed officials use the PCE indicator as the main benchmark for measuring inflation, which continues to run above the central bank’s long-term goal of 2%.

Core inflation excluding food and energy increased by 0.2% and 2.6% respectively from the previous year, also in line with expectations. Because gas and grocery costs tend to fluctuate more than other items, policymakers tend to focus more on core operations to better gauge long-term trends.

stock market futures Wall Street opened on a positive note after the news, with U.S. Treasury yields lower. Futures markets expect the Fed to take a more aggressive path of interest rate cuts.

“The two-word summary of the report is ‘good enough,'” said Robert Frick, corporate economist at Navy Federal Credit Union. “Spending is sufficient to sustain expansion, revenue is sufficient to sustain spending, and personal consumption expenditures inflation levels are sufficient to sustain expansion.” The Fed’s decision to cut interest rates was easy.”

Prices of goods fell 0.2% this month, while prices of services rose 0.2%. Housing-related prices rose 0.3% in June, a slight slowdown from the 0.4% rise in the past three months and the smallest monthly increase since at least January 2023.

The report also pointed out that personal income grew by only 0.2%, lower than the expected 0.4%. Spending rose 0.3%, in line with expectations.

As spending remained relatively strong, the savings rate fell to 3.4%, its lowest level since November 2022.

The report comes as the market is paying close attention to the direction of the Federal Reserve’s monetary policy.

Few expect the Federal Open Market Committee to take any action at its policy meeting next Tuesday and Wednesday. However, markets are pricing in a strong rate cut at the September meeting, which would be the first since the early days of the pandemic.

“Overall, it’s been a good week for the Fed. The economy appears to be on solid footing and PCE inflation has remained largely stable,” said Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley. (Chris Larkin) said. “But a rate cut next week is still unlikely. Although there is enough time for the economic situation to change before the September FOMC meeting, the data trend has been moving in the direction of the Fed.”

With inflation rising to its highest level in more than 40 years in mid-2022, the Federal Reserve began an aggressive series of rate hikes, taking its benchmark borrowing rate to its highest level in about 23 years. However, the Fed has been on pause over the past year as it assesses volatile data, which showed a recovery in inflation earlier this year but has more recently shown a gradual cooling, leaving many policymakers discussing at least one rate cut this year. possibility.

According to CME Group’s FedWatch Indicator, the futures market has priced in about a 90% chance of a rate cut in September, followed by rate cuts at the November and December FOMC meetings.

However, Fed officials have been cautious in their remarks, emphasizing that there is no set policy path and that data is needed to guide it.

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