The Federal Reserve’s preferred inflation measure climbed incrementally as expected in June, leaving monetary policy expectations unchanged across the financial markets. Data released by the Bureau of Economic Analysis this morning showed the core personal consumption expenditures index rising 0.2 percent (0.182 unrounded) from the prior month, matching market forecasts for a modest acceleration from May’s 0.1-percent (0.127 unrounded) print. On a year over year basis, core price growth held at 2.6 percent, the same as in May, slightly above economist estimates. 

The overall personal consumption expenditures index rose 0.1 percent relative to the prior month, up 2.5 percent from a year ago, down from 2.6 percent. Personal income rose 0.2 percent month-over-month, half the expected 0.4-percent pace, and inflation-adjusted household spending climbed 0.2 percent, missing forecasts set closer to 0.3 percent. The savings rate, which can offer a preview of future spending capacity, fell to 3.4 percent from a revised 3.5 percent, declining sharply a year ago as consumers in lower income buckets use up excess savings from the pandemic and continue to spend beyond their means.

Jerome Powell’s favoured “supercore” inflation measure – core services excluding housing rents – rose 0.19 percent month-over-month, marginally accelerating from 0.18 in the prior month.

Treasury yields are pushing slightly lower and the dollar is holding steady, with market participants remaining convinced that the Federal Reserve will begin subtly telegraphing a September rate cut at next week’s meeting.