Consumer spending in the U.S. remained solid in June as the nation’s inflation rate continued to slow. This development is expected to encourage the Federal Reserve to bring an end to its cycle of aggressive interest rate hikes.
Measures in terms of the personal consumption expenditures (PCE) price index, inflation increased by 0.2%, compared to a 0.1% rise in May. The Commerce Department revealed that for the last 12 months ending June, inflation rose 3%, falling from May’s 3.8% rise and proving to be the lowest rate since March 2021.
Excluding volatile food and energy prices, core PCE rose by 0.2%; lower than its 0.3% increase in May. The core PCE price index rose 4.1% on a year-on-year basis, cooler than the 4.2% year-on-year rise forecast by economists polled by Reuters. Month-over-month core PCE was estimated to rise by 0.2%, on par with the actual figure.
Still above the Federal Reserve’s target of 2%, cooling inflation could convince the central bank to implement a rate pause at its next policy meeting, with Fed Chair Jerome Powell hinting at this possibility.