HomeFinancial MarketsFederal Reserve's Preferred Inflation Measure Hits Two-Year Low

Federal Reserve’s Preferred Inflation Measure Hits Two-Year Low

The Personal Consumption Expenditures (PCE) Index, the Federal Reserve’s preferred tool to measure inflation, grew 3.8% year-over-year in June, lower than the 3.8% rise in May. This is the lowest annual rate that the index has grown since September 2021.

Core PCE, which excludes volatile food and energy components, grew 4.1% at a yearly rate, down from its 4.6% rise in May and beating Wall Street’s expectation of a 4.2% rise.

While Federal Reserve Chair Jerome Powell reminded that inflation remains above the Fed’s 2% target, Wells Fargo senior economist Tim Quinlan expressed optimism regarding the direction that inflation is moving, commenting that “Inflation is moving in the direction that will be liked by the Fed.”

The PCE report followed the release of the Bureau of Labor Statistics report showing that U.S. wage growth slowed in the second quarter. Wages and salaries grew by 4.6%, compared to the 5.1% growth experienced in the first quarter. The slowest growth rate since the fourth quarter of 2021, this slowing wage growth is an indicator of cooling inflation.

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