US Inflation Eases Amid Middle East Conflict, Rate Hike Looms
US inflation slowed in June, but a temporary reprieve is likely as renewed hostilities in the Middle East push oil prices higher. The Personal Consumption Expenditures Price Index rose 3.7% over the past 12 months, down from May's 4.1%, the largest gain since April 2023.
The Commerce Department's Bureau of Economic Analysis reported a month-over-month drop in PCE inflation of 0.1%, the weakest reading since April 2020. Excluding food and energy components, the index rose 3.3% year-over-year in June after increasing 3.4% in May.
The Federal Reserve's target for inflation is 2%, and Fed Chairman Kevin Warsh emphasized that there is no soft target. Despite this commitment, economists expect a rate hike as soon as September to combat rising prices. Brent oil prices are hovering around $90 per barrel, while average US gasoline prices have surpassed $4 per gallon.