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Fed’s preferred measure of annual inflation remains steady at 2.6 percent in July
(MENAFN) The US Federal Reserve's preferred measure of annual inflation remained steady at 2.6 percent in July, as reported by the Commerce Department on Friday. This figure was slightly lower than market expectations, which also predicted a 2.6 percent rise, following the core personal consumption expenditures (PCE) price index's annual increase of 2.6 percent in June.
On a month-to-month basis, the core PCE price index saw a modest increase of 0.2 percent in July, maintaining the same growth rate observed in June. This monthly rise aligned with market estimates, reflecting consistent inflationary pressures. Meanwhile, the broader PCE price index, which includes volatile food and energy prices, also rose by 2.5 percent annually in July, matching its performance in June but slightly below the expected 2.6 percent. On a monthly basis, this index grew by 0.2 percent in July, following a 0.1 percent increase in June, again in line with market forecasts.
These modest gains in the PCE and core PCE indices are not anticipated to alter investor expectations that the Federal Reserve may deliver its first interest rate cut during its upcoming two-day meeting on September 18. The Fed has previously raised interest rates 11 times between March 2022 and July 2023 to combat record-high inflation, pushing the federal funds rate to a target range of 5.25 percent-5.5 percent, the highest level in 22 years. Despite these increases, the central bank opted to skip four rate hikes last year and five more this year.
Additionally, the Commerce Department's Bureau of Economic Analysis reported slight price movements in July. Prices for goods decreased by less than 0.1 percent, while prices for services saw a 0.2 percent increase. On an annual basis, goods prices fell slightly by less than 0.1 percent, and services prices rose by 3.7 percent. Food prices increased by 0.2 percent monthly and 1.4 percent annually, while energy prices showed minimal changes, increasing by less than 0.1 percent monthly and 1.9 percent annually. Real personal consumption expenditures (PCE) increased by 0.4 percent in July, driven by a significant 0.7 percent rise in spending on goods, particularly motor vehicles and parts, and a 0.2 percent rise in spending on services.
On a month-to-month basis, the core PCE price index saw a modest increase of 0.2 percent in July, maintaining the same growth rate observed in June. This monthly rise aligned with market estimates, reflecting consistent inflationary pressures. Meanwhile, the broader PCE price index, which includes volatile food and energy prices, also rose by 2.5 percent annually in July, matching its performance in June but slightly below the expected 2.6 percent. On a monthly basis, this index grew by 0.2 percent in July, following a 0.1 percent increase in June, again in line with market forecasts.
These modest gains in the PCE and core PCE indices are not anticipated to alter investor expectations that the Federal Reserve may deliver its first interest rate cut during its upcoming two-day meeting on September 18. The Fed has previously raised interest rates 11 times between March 2022 and July 2023 to combat record-high inflation, pushing the federal funds rate to a target range of 5.25 percent-5.5 percent, the highest level in 22 years. Despite these increases, the central bank opted to skip four rate hikes last year and five more this year.
Additionally, the Commerce Department's Bureau of Economic Analysis reported slight price movements in July. Prices for goods decreased by less than 0.1 percent, while prices for services saw a 0.2 percent increase. On an annual basis, goods prices fell slightly by less than 0.1 percent, and services prices rose by 3.7 percent. Food prices increased by 0.2 percent monthly and 1.4 percent annually, while energy prices showed minimal changes, increasing by less than 0.1 percent monthly and 1.9 percent annually. Real personal consumption expenditures (PCE) increased by 0.4 percent in July, driven by a significant 0.7 percent rise in spending on goods, particularly motor vehicles and parts, and a 0.2 percent rise in spending on services.
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