PCE inflation rose 0.3% in June, with the annual rate reaching 2.6%.
Jerome Powell now has exactly what he needs to justify staying on the sidelines. On Thursday, the Commerce Department reported that the overall and core PCE inflation figures for June were higher than expected.
The monthly PCE index rose 0.3%, up from 0.1% in May, while the annual rate reached 2.6%, an increase from 2.3% the previous month. The core PCE reading, which excludes food and energy, also came in at 0.3% month-over-month and 2.8% year-over-year, slightly higher than 2.7%.
All these numbers exceed Wall Street's expectations, giving Powell and his colleagues at the Fed new reasons to keep interest rates where they are.
This update came a day after the Federal Reserve kept its benchmark interest rate unchanged for the fifth consecutive time, still stuck between 4.25% and 4.5%.
Although policymakers have signaled patience, these numbers now suggest that inflation is no longer cooling as it once did. And with pressure building due to the White House's tariff strategy, no one at the Fed seems in a hurry to cut rates anytime soon.
Trump attacks Powell again as inflation data arrives.
As PCE numbers fell, President Donald Trump once again wasted no time in attacking Powell on Truth Social. He called him 'TOO LATE, TOO STUPID, & TOO POLITICAL' and claimed that the Fed Chairman is costing the US 'TRILLIONS OF DOLLARS.' Trump added, 'In other words, 'Too late' is a TOTAL LOSER, and our country is paying the price!'
The post came hours before the inflation figures were released, with Trump continuing a series of months of public attacks against Powell. He has repeatedly blamed the Fed Chairman for being behind on rates and mishandling the renovation of the central bank's headquarters.
Amid the noise, the Fed is clearly monitoring how Trump's tariffs are filtering into the economy. Chairman Powell said Wednesday that the committee is not in a hurry to act and is 'waiting to see' how these trade policies influence growth and inflation. He also stated that the Fed is prepared to respond quickly if the economy shows signs of a weakened labor market or rising prices.
The Commerce Department report did not provide much relief. Prices for goods rose 0.6% from June 2024. Durable goods rose 0.9%, while non-durable goods climbed 0.5% year-over-year. Service prices, which have remained persistent throughout this cycle, rose 3.5% compared to the previous year.
This inflation in services is one of the reasons why core PCE remains stubbornly above the Fed's 2% target. Policymakers view the core reading as the most accurate inflation barometer, and it is again moving in the wrong direction.
The Fed is monitoring wages and savings as markets react to the inflation print.
Wage growth has not done much to ease concerns either. Wages and salaries rose just 0.1% month-over-month, the slowest pace since November 2024. This sluggish wage growth could become a red flag if it lingers too long, especially with service costs continuing to rise.
Meanwhile, the personal savings rate remained steady at 4.5%, showing no improvement from May. Americans are still saving less than before the pandemic, a sign that high prices and ongoing costs are squeezing household budgets.
Crypto traders have also kept a close eye on gold, which surged as inflation data fueled new uncertainty regarding rate cuts. With Trump’s August 1 deadline to conclude trade negotiations approaching, many have turned to safer bets.
Spot gold rose 1% to $3,308.07 an ounce at 8:55 AM ET, while US gold futures added 0.3% to $3,306.10. The rush to gold shows that the market still sees a lot of risks ahead, especially with inflation rising again and Trump’s trade war adding fuel to the fire.
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