WASHINGTON: A key indicator of US inflation cooled in June to the lowest annual rate in over two years, said government data released Friday, although it remains above the central bank’s target.
The Federal Reserve’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, rose 3.0 percent last month from June 2022, down from a 3.8 percent rise in May, said the Commerce Department.
From May to June, the PCE price index ticked up 0.2 percent, a touch above the 0.1 percent rate in the previous month.
Fed raises interest rates, leaves door open to another increase
Personal consumption expenditures rose 0.5 percent, while the rise in personal income moderated as well.
With cost-of-living pressures escalating in the past year, the Fed lifted interest rates rapidly to tamp down demand and rein in prices – and the effects of its moves have been rippling through the world’s biggest economy.
Inflation has come down from last year’s peak and retail sales has weakened with consumers pressured by higher borrowing costs and still-elevated prices.
But the labor market has remained strong with historically low unemployment, fueling hopes that the US economy can achieve a “soft landing” in which inflation eases without triggering a major downturn.
In June, prices for goods were seen slipping even as the costs of services picked up from a year ago.
While the direction in which inflation is headed will be positive news for policymakers, the figure remains higher than the central bank’s two percent target, suggesting more actions might be taken by officials.
Excluding the volatile food and energy components, the PCE price index rose 4.1 percent from a year ago last month, easing from May’s 4.6 percent rate as well.
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