June PCE data shows modest inflation

The U.S. Personal Consumption Expenditures (PCE) Price Index rose 0.1% month-over-month in June 2024, matching forecasts, following a flat reading in May. The increase in June was driven by a 0.2% rise in service prices, while goods prices fell by 0.2%. The core PCE Index, which excludes food and energy, advanced 0.2%, up from 0.1% in May and exceeding the forecast of 0.1%. Food prices increased by 0.1%, while energy prices declined by 2.1%. Year-over-year, the PCE inflation rate edged down to 2.5% from 2.6%, aligning with expectations. However, core PCE inflation remained steady at 2.6%, falling short of the anticipated 2.5%.

Policymakers closely monitor services inflation excluding housing and energy due to its persistent nature. This measure rose by 0.2% in June for the second consecutive month, as reported by the Bureau of Economic Analysis (BEA).

The data released on Friday provides evidence that the Federal Reserve's monetary tightening is impacting the economy without causing significant harm. While the Fed is widely expected to maintain its benchmark interest rate at a two-decade high in the upcoming meeting, market participants are anticipating the first rate cut to occur in September.