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Fed’s preferred inflation gauge offered little relief in June, with the core PCE index holding at 2.8% yoy, above market expectations of 2.7% yoy. Headline PCE inflation also rose more than expected from 2.4% yoy to 2.6% yoy. Both monthly readings stood at 0.3% mom, reinforcing the message that price pressures are proving sticky and raising questions about the timing of any Fed rate cuts.
On the household front, income and spending showed modest improvement. Personal income climbed 0.3% mom, rebounding from a surprise decline in May. Personal spending rose by the same margin, albeit slightly below the 0.4% mom forecast. The recovery suggests consumers remain active, but the slight miss in spending hints at growing sensitivity to price levels and borrowing costs.
Labor data, however, remained steady: initial jobless claims edged up by 1 to 218k and continuing claims were flat at 1.946 million—consistent with a still-solid employment backdrop.
Altogether, the mixed bag of sticky inflation, resilient income, and cautious consumption leaves the Fed on hold, with markets still uncertain about the case for a September rate cut.
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