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Hazloc Heaters

U.S. Core Inflation Firms as Fed Gathers for Expected Rate Cut

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These translations are done via Google Translate

By Jeff Kearns

The Federal Reserve’s preferred measure ofunderlying U.S. inflation showed signs of rebounding back toward the central bank’s target in June just before a widely anticipated interest-rate cut spurred partly by weak price gains.

The core personal consumption expenditures price gauge, which excludes food and energy, climbed 0.2% from the prior month and 1.6% from a year earlier, according to a Commerce Department report Tuesday that reflected annual revisions to more than four years of data. The broader PCE rose 0.1% on the month and 1.4% annually.

While the annual core measure was below the 1.7% median estimate and prior months were revised lower, there were signs of gathering momentum. The core PCE index increased at a 2.5% annualized rate over the past three months compared with a 1.7% pace in the three months through May and just 0.5% in March.

Inflation trending back up toward the Fed’s 2% target is a welcome development for policy makers who have expressed concern that price gains are too low amid a historically strong labor market. Economists forecast the central bank will reduce interest rates by a quarter point Wednesday amid risks from trade and slower global growth, which manifested in weaker business investment in GDP data.

Sky Eye Measurement

Tuesday’s report for June also showed that purchases, which make up the majority of the economy, increased 0.3% from the prior month, as forecast, following an upwardly revised 0.5% gain and Friday’s gross domestic product report showing consumers were a surprisingly strong source of second-quarter economic growth. Personal income climbed 0.4%, also as forecast, and signaling support for spending later this year.

Sky Eye Measurement

While the Fed officially targets 2% annual increases for the overall PCE inflation index, it usually cites the core measure as a more useful indicator of underlying pressures because food and energy costs tend to be volatile.

Fed Chairman Jerome Powell has said low inflation may prove more persistent, while Chicago Fed President Charles Evans has said the risk that underlying inflation may be stuck below target and other weak price measures raise strategic concerns for the central bank.

Get More

  • The personal saving rate increased to 8.1% from 8% the prior month.
  • Adjusted for inflation, disposable income advanced 0.3%, the most since February, following a 0.2% monthly gain.
  • Inflation-adjusted spending rose 0.2% after a 0.3% increase.

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