Inflation Reports Released: Fed on Alert as Soft Commodity Prices Surge

Two new inflation measures, the PCE price index excluding food, energy, and housing, and PCE services excluding energy and housing, indicate a continuing disinflation trend. The Federal Reserve is closely monitoring these core measures of inflation, which are considered better predictors of future inflation than headline measures. In the second quarter, the PCE price index excluding food, energy, and housing slowed to a 3% rate, while PCE services excluding energy and housing slowed to a 3.5% rate. Chair Jerome Powell highlighted significant declines in core inflation, particularly in the goods sector, housing services, and non-housing services. The broader core PCE price index for the second quarter remained unchanged at 3.7%.