June saw a 3% decline in inflation, as reported by the Fed’s key gauge.
Inflation Falls to 3% Annual Rate in June
The latest report from the Bureau of Economic Analysis reveals that inflation, as measured by the gauge favored by the Federal Reserve, has fallen to a 3% annual rate in June. This decline in the personal consumption expenditures price index is a positive sign that inflationary pressures are easing, thanks to the Fed’s efforts to slow down economywide spending by raising interest rates.
While the inflation rate is still higher than the central bank’s goal of 2% annual price growth, it is good news for the economy and the Biden administration. The administration has been highlighting positive economic developments as evidence that President Joe Biden’s agenda is working.
Core PCE Inflation at 4.1% Year-Over-Year Rate
Another key measure of inflation, the core PCE inflation, which excludes energy and food prices, is currently at a 4.1% year-over-year rate. This measure is generally less volatile and provides further insight into the state of inflation.
This latest PCE report follows other recent inflation reports that showed more significant declines than expected by many economists.
The consumer price index also indicates a decrease in inflation, with a 3% annual rate in June, significantly lower than the historic highs recorded in June 2022. Additionally, wholesale inflation remains nearly flat, according to the most recent data from June.
These declines in inflation are accompanied by other positive indicators in the economy, such as a interest rate hikes until inflation spike”>strong labor market. In June, the economy added 209,000 jobs, and the unemployment rate has remained consistently low at around 3.4% to 3.7% over the past year.
President Biden received further encouragement when it was announced that the gross domestic product for the second quarter exceeded consensus expectations. This demonstrates that the economy is thriving despite the Fed’s interest rate hikes, which are currently at their highest level since the dot-com bubble in 2001.
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The Bureau of Economic Analysis reported that economic growth increased to a 2.4% annual rate in the second quarter of this year, up from 2% in the previous quarter. This surpassed economists’ expectations of a 1.7% rate.
The Fed recently raised rates, bringing its target range to 5.25% to 5.50%. While there were previous plans for another rate hike this year, most investors now believe that the July increase will be the final adjustment.
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