Fed's Rate Hike Plans in Jeopardy as PCE Inflation Slows in June

The personal consumption expenditures (PCE) inflation measure, closely monitored by the Federal Reserve, dropped sharply in June, potentially influencing the Fed's decision to maintain interest rates after a series of aggressive hikes. While consumer prices increased by 3% from a year earlier, below the 3.8% pace in May, the annual increase in core prices fell to 4.1%, the lowest since September 2021. Household income and spending both rose, indicating a consumer with the ability to spend and potentially driving prices higher. The reports suggest a positive direction for the economy, but the Fed may remain cautious about halting rate increases until there is sustained evidence of an inflation slowdown.