Inflation in the United States of America (USA) slowed slightly to 2.5% in June, according to the PCE (Consumer Expenditures) index released this Friday by the Bureau of Economic Analysis. After three consecutive months at 2.7%, inflation slowed to 2.6% in May and slowed by another tenth in June. This price change is measured in year-on-year terms (i.e., in relation to the same month last year).
However, core inflation (excluding food and energy prices) remained at 2.6%, which is the benchmark for the US Federal Reserve (Fed), the US central bank, which meets next week on 31 July. Inflation in the services sector also remains high, having, however, slowed slightly from 4% in May to 3.9% in June.
Futures markets have seen a rise in the likelihood of three consecutive rate cuts by the Fed, led by Jerome Powell, on September 18, November 7 (two days after the presidential election) and December 8, according to Fed Watch, part of the CME group. Regarding next week’s meeting, the futures market continues to give a 90% probability of keeping rates at the current range of 5.25% to 5.5%. Markets believe that the Fed will postpone the first rate cut decision until September.
In May and June, inflation (measured by the PCE index) in the US economy was similar to that recorded in the euro area. In the services sector, inflation continued to be higher in the euro area (4.1%).
The Fed places more emphasis on assessing the trajectory of the PCE index than on the other consumer price index (CPI), which is published by another agency, the Bureau of Labor Statistics. The CPI slowed to 3.0 percent in June from 3.3 percent in May. The CPI is less comprehensive than the PCE because it only measures inflation in urban areas and does not take into account consumer spending by entities such as insurance companies or employers on behalf of consumers (as is the case in the health care sector).
Source: expresso.pt
