The Fed's Preferred Inflation Metric Slowed in June
In June 2026, the U.S. Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s primary inflation gauge—experienced a rare monthly decline of 0.1%, marking its first drop in six years. This decrease was largely driven by an unexpected 9.2% fall in gasoline prices following a temporary ceasefire and the reopening of the Strait of Hormuz, which briefly lowered oil prices. However, this dip is seen as short-lived rather than indicative of long-term inflation relief. Gasoline had risen sharply in prior months—up 20.9%, 5.5%, and 6.5% in March, April, and May respectively—and the recent drop did not offset those increases. Moreover, oil prices have already rebounded as tensions resumed with Iran, suggesting that July’s PCE is likely to rise again due to higher fuel costs. For investors, this means there's little reason for optimism: core inflation (excluding food and energy) remained modest at 0.1%, but overall consumer spending still reflects high inflationary pressures.
Topics: Federal Reserve Gasoline Prices Inflation PCE Price Index