🔥June’s PCE inflation cooled as forecast—but the part that cooled is the one the Fed doesn’t care about


🔴The June PCE data just released:
- Headline PCE +3.7% YoY, in line with forecasts and down from +4.1% last month
- Core PCE +3.3% YoY, in line with forecasts and down from 3.4% last month
- Month-over-month +0.1% MoM, below the +0.2% forecast—the lowest level since 03/2025
- Overall PCE -0.1% MoM, in line with forecasts and below +0.5% last month 🟢
-> For the first time, the US has experienced month-over-month disinflation since the Covid period in April 2020.
🔴PCE components:
- Within overall PCE, energy cooled -9.2% MoM from +6.5% last month -> the reason the headline is negative.
- Core PCE, services remain the main driver with +0.155% MoM, down from +0.35% last month. .
- Consumer spending rose $65.2B, contributing thanks to goods like jewelry and cars. Dragged down by energy -$48.1B.
🔴All the MoM disinflation came from energy. If you exclude gasoline and food, the picture is still not cooling at all. Supercore PCE +3.81% YoY—near the peak of the 2024-2026 period and continuing to rise.
🔴Services are the sticky component the Fed truly cares about, yet they didn’t react to oil prices. The decline in energy prices here works like a tax cut—supporting demand rather than signaling durable easing of inflation.
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