The latest Personal Consumption Expenditures (PCE) report, a key inflation gauge, showed prices rose 0.3% in June, bringing the annual rate to 2.6%. Both numbers came in slightly above expectations.
More importantly, Core PCE, which excludes food and energy and is the Fed’s preferred inflation measure, also rose 0.3% in June. On a yearly basis, it now stands at 2.8%, just above the 2.7% forecast.
What’s the bottom line?
Reaching the Fed’s 2% annual Core PCE goal may take time. That’s because last year’s July through December inflation numbers were already low (ranging from 0.1% to 0.29%). As those drop off the 12-month average, replacing them with similar or slightly higher monthly increases won’t move the needle much.
Looking ahead, the early 2025 numbers were higher (0.34% in January and 0.48% in February). Replacing these higher numbers with potentially lower monthly increases next year should make it easier to see faster progress toward the 2% target.
