Cooling US inflation bolsters September rate cut hopes
Published: 02:07 PM,Jul 28,2024 | EDITED : 06:07 PM,Jul 28,2024
A man arranges produce at Best World Supermarket in the Mount Pleasant neighborhood of Washington, DC. — Reuters
WASHINGTON: US prices increased moderately in June as the declining cost of goods tempered a rise in the cost of services, underscoring an improving inflation environment that could position the Federal Reserve to begin cutting interest rates in September.
The report from the Commerce Department on Friday also showed consumer spending slowed a bit last month. Signs of easing price pressures and a cooling labor market could boost the confidence of Fed officials that inflation is moving toward the US central bank's 2% target. The Fed will hold its next policy meeting on July 30-31.
'The key question now is whether the positive momentum we've seen over the last three months will be disrupted heading into the September meeting,' said Olu Sonola, head of US economic research at Fitch Ratings. 'With one eye on recent labor market developments, the Fed is now likely to use the meeting next week to set the stage for a September rate cut.'
The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the Commerce Department's Bureau of Economic Analysis reported.
The increase in PCE inflation was in line with economists' expectations. Goods prices dropped 0.2% after falling 0.4% in May. Prices for motor vehicles and parts declined 0.6%. Furnishings and durable household equipment prices dropped for a third straight month, but the cost of other long-lasting manufactured goods rebounded 1.8%.
Prices for gasoline and other energy goods decreased 3.5% after falling 3.4% in May. Clothing and footwear were cheaper for a second straight month. — Reuters
The report from the Commerce Department on Friday also showed consumer spending slowed a bit last month. Signs of easing price pressures and a cooling labor market could boost the confidence of Fed officials that inflation is moving toward the US central bank's 2% target. The Fed will hold its next policy meeting on July 30-31.
'The key question now is whether the positive momentum we've seen over the last three months will be disrupted heading into the September meeting,' said Olu Sonola, head of US economic research at Fitch Ratings. 'With one eye on recent labor market developments, the Fed is now likely to use the meeting next week to set the stage for a September rate cut.'
The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the Commerce Department's Bureau of Economic Analysis reported.
The increase in PCE inflation was in line with economists' expectations. Goods prices dropped 0.2% after falling 0.4% in May. Prices for motor vehicles and parts declined 0.6%. Furnishings and durable household equipment prices dropped for a third straight month, but the cost of other long-lasting manufactured goods rebounded 1.8%.
Prices for gasoline and other energy goods decreased 3.5% after falling 3.4% in May. Clothing and footwear were cheaper for a second straight month. — Reuters