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July's Personal Consumption Expenditures (PCE) data— the Federal Reserve's preferred measure of inflation— came in line with expectations for the month. Core PCE, excluding volatile food and energy costs, increased by 2.6% year-over-year. Meanwhile, the headline PCE index rose 2.5%.
Yahoo Finance Federal Reserve reporter Jennifer Schonberger breaks down the details of the print, discussing how these figures will likely influence the central bank's upcoming monetary policy decisions.
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This post was written by Angel Smith
Personal consumption expenditures, PCE coming in in line with expectations, rising two tenths of a percent on a monthly basis, two and a half percent year over year, showing inflation is still cooling. So, what does this report even signal about the economy and why does it matter for the Fed's policy rate? Yahoo Finance Fed correspondence Jennifer Schonberger has the details for us this morning. Hey, Jennifer.
Good Friday morning, Brad. That's right. This fresh new reading on inflation is keeping the Federal Reserve on track to cut rates come September. The Fed's preferred inflation gauge, as you mentioned, the so-called core personal consumption expenditures index, which excludes those volatile food and energy prices, clocked in at 2.6% for the month of July, a tenth of a percent better than estimates of 2.7%, and holding that same level as in June. This is particularly good news, given that the comparison year-over-year was tough as inflation markedly fell in the second half of last year, and this number still showed progress on top of that. Now, month over month, the measure held steady from June at two tenths of a percent. At this point, Fed officials are feeling pretty confident that inflation is sustainably moving back towards their 2% target. They're now now more focused on the job side of their mandate. They're worried about further weakening in the job market. Today's inflation report, likely to cause the Fed to cut 25 basis points in June, not 50 basis points. For them to go half a percent lower, we would need to see job market conditions deteriorate further. We will get another jobs report on September 6th. And guys, just anecdotally speaking with Alan Blinder, former Fed chair and well-known economics professor from Princeton last week, he told me the job market can't cool much further without a recession. Back to you.
Oh, Jen, big fan of your big interviews with the Fed. Good stuff. Jen Schonberger, thanks so much.
