One of the US Fed’s favoured measures of inflation is the change in the core personal consumption expenditures (PCE) price index. The core version strips out energy and food components, which are volatile from month to month, in an attempt to identify the prevailing trend. It’s not the only measure of inflation used; the Fed also tracks the Consumer Price Index (CPI) and Producer Price Index (PPI) from the Department of Labor.
The latest figures have been published by the Bureau of Economic Analysis as part of the June personal income and expenditures report. At 0.1% for the month, core PCE inflation was lower than May’s figure and less than the +0.2% which was expected.
Reactions from financial markets were mixed. Bond yields at the front of the curve increased while yields at the long end fell and the USD was a touch stronger against sterling and the euro. 2 year bond yields increased by 2bps to 2.68% while 10 year yields slipped 1bp to 2.96% and 30 year bond yields fell by 3bps to 3.08%.