The Federal Reserve's preferred measure of U.S. inflation fell for the first time in more than two years last month, data indicated Friday, suggesting consumer price pressures are beginning to ease amid tumbling gas prices and an improving labor market.
The July core PCE Price Index rose 4.6% from last year, the lowest since October of last year, and just 0.1% on the month, the Bureau of Economic Analysis reported, a figure that came in firmly ahead of Wall Street forecasts.
The headline PCE index fell 0.1% on the month, in fact, echoing the flat-line inflation estimate published by the Commerce Department, and eased to 6.3% on the year. the month-on-month decline was the first since April of 2020.
Personal income rose by a weaker-than-expected pace of 0.2%, while personal spending rose by 0.1%, the BEA noted, well south of the Street consensus forecast of a 0.4% advance.
View the original article to see embedded media.
Wall Street had first pared earlier declines following the data release, which came ahead of Jerome Powell's keynote address to the Jackson Hole central banker's symposium at 10:00 am eastern time, but extended declines following the Fed chair's remarks.
Speaking as part of a keynote address to the Kansas City Fed's annual central banking symposium, Powell said higher rates would likely lead to weaker near-term growth and softer conditions in the job market, describing it as the "unfortunate costs of reducing inflation."
"We must keep at it until the job is done," Powell said of the Fed's inflation fight. "History shows that the employment costs of bringing down inflation are likely to increase with delay."
Benchmark 10-year U.S. Treasury bond yields fell 5 basis points lower to 3.05% following the data release, while the dollar index fell to a session low of 108.09 against a basket of six global currencies.
The CME Group's FedWatch tool is showing a 54.5% chance of a 75 basis point rate hike in September, down from around 63% prior to the PCE data, with bets now pointing to a potential pause by the end of the year.
