June’s Personal Consumption Expenditures (PCE) report was released on Friday, showing that U.S. prices rose slightly higher than expected. The core PCE index, which excludes volatile costs of food and energy, rose by 2.6% year-over-year, exceeding economists’ expectations of a 2.5% rise. The core PCE index is the Federal Reserve’s preferred measure of inflation.
Core PCE rose 0.2% on a monthly basis, in line with economists’ expectations and outpacing the 0.1% month-over-month gain in May. Still, the yearly rise in June is the slowest recorded over the past three years.
Despite being higher than expected, the latest PCE index paints a positive price outlook, falling in line with the latest Consumer Price Index (CPI) data showing a 0.1% month-over-month rise.
The latest PCE data is bound to have an impact on the Federal Reserve’s next moves regarding its interest rate policy. Fed Chair Jerome Powell noted that the PCE report is building the central bank’s confidence that inflation is gravitating toward the Fed’s 2% target. The Federal Reserve is set to announce its next interest rate policy decision on July 31.