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Business Economy 1 min read

The Fed’s preferred inflation gauge cooled in June. It might not last

By Alicia WallaceAlicia Wallace

21 min ago

PUBLISHED Jul 30, 2026, 8:38 AM ET

InflationEconomyFederal agencies

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Falling gas prices were expected to drive inflation lower in June. Economists are expecting the Personal Consumer Expenditures price index slowed to 3.7% last month.

Falling gas prices were expected to drive inflation lower in June. Economists are expecting the Personal Consumer Expenditures price index slowed to 3.7% last month.

Brandon Bell/Getty Images

Inflation fell last month for the first time in six years, new data showed Thursday, but the seemingly welcome reading is likely a temporary blip.

The Personal Consumption Expenditures price index – the gauge used by the Federal Reserve for its target inflation rate – dropped 0.1% from May, bringing the annual rate to 3.7% from 4.1%, Commerce Department data showed.

The inflation slowdown – which was expected – is largely due to energy prices, notably those at the fuel pump, which tumbled amid a false dawn in the Middle East war: In mid-June, the US and Iran reached a Memorandum of Understanding and ceasefire that ultimately was broken later that month.

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When stripping out volatile energy and food prices, the “core” PCE index rose 0.1% on a monthly basis and was up 3.3% from a year ago.

The PCE price index is part of the Commerce Department’s monthly Personal Income and Outlays report, which includes comprehensive data on how Americans earn, spend and save.

In June, consumers increased their spending by 0.3% from the month before. When adjusting for inflation, spending was up 0.4%.

This story is developing and will be updated.

InflationEconomyFederal agencies

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