June PCE cools, but inflation relief may be temporary

The Commerce Department’s Personal Consumption Expenditures price index—the Fed’s preferred inflation gauge—fell 0.1% in June, pulling the annual rate down to 3.7% from 4.1%. The drop was driven largely by energy prices, with gasoline prices sliding as Middle East tensions cooled, boosting energy-driven consumption. Core PCE rose 0.1% month over month to 3.3% year over year, suggesting underlying inflation remains around 3%. While spending grew and the June slowdown provided some relief to households, analysts warn the decline may reverse in July due to energy volatility, keeping the inflation outlook and Fed policy path uncertain.