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Key US Inflation Indicator Rises While Consumer Spending Stagnates

Summary: According to sources, the core inflation indicator preferred by the Federal Reserve accelerated in June, reaching one of the fastest growth rates this year, while consumer spending showed almost no growth, highlighting factors causing policymakers to diverge on interest rate direction. Data released on Thursday showed that the core Personal Consumption Expenditures (PCE) price index, ...

According to sources, the core inflation indicator preferred by the Federal Reserve accelerated in June, reaching one of the fastest growth rates this year, while consumer spending showed almost no growth, highlighting factors causing policymakers to diverge on interest rate direction. Data released on Thursday showed that the core Personal Consumption Expenditures (PCE) price index, excluding food and energy prices, rose 0.3% from May. It rose 2.8% year-on-year, reflecting limited progress in curbing inflation over the past year.

Adjusted for inflation, consumer spending slightly rebounded in June, after a decline in May. These data indicate conflicting views among Fed officials on the direction of monetary policy due to the tug-of-war in the economy. On one hand, progress on inflation has essentially stalled, with central bank officials concerned that President Trump's tariffs could bring greater upward pressure on prices. On the other hand, reduced consumer spending due to a soft job market could lead to an overall economic slowdown.

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