Inflation cooled to 2.5% for the year ending in June in the index favored by the Federal Reserve, the Bureau of Economic Analysis reported Friday, down one-tenth of a percentage point from the previous reading.
The inflation gauge, the personal consumption expenditures index, is now clocking the lowest such rate since February 2021, just after President Joe Biden took office.
The consensus among economists was that PCE inflation would be running at 2.4%.
The drop in headline inflation is some good news for President Joe Biden and the Federal Reserve, which has been seeking additional evidence that its campaign to lower inflation by raising interest rates is working. The Fed’s target is 2% inflation in the PCE index.
From May to June, inflation rose 0.1%, about in line with forecast expectations.
Core PCE inflation, a measure of inflation that strips out volatile energy and food prices, remained at a 2.6% year-over-year rate.
PCE inflation is charting lower than the consumer price index, which is the most closely watched inflation gauge. The most recent reading of the CPI showed that inflation fell slightly to 3% for the year ending in June.
Any and all inflation data is big news as the November elections approach. Vice President Kamala Harris has taken the mantle from Biden, who is not running for reelection, but is still being weighed down by the administration’s poor economic approval ratings.
Because of the too-high inflation, the Fed has been forced to hike interest rates to the highest level they have been since the dot-com bubble at the turn of the century. The higher rates have slowed the pace of inflation, but have made it more unaffordable to take on debt and secure an auto loan or purchase a home.
Republicans will be working to tie Harris to the economy under Biden. The Biden administration, meanwhile, has attempted to focus on the bright spots in the economy like low unemployment and continued economic output.
Some of that good news is that the economy continues to expand at a healthy clip.
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The economy grew at a robust 2.8% seasonally adjusted annual rate in the second quarter of this year, the Bureau of Economic Analysis reported Thursday in a preliminary estimate.
Still, inflation is overshadowing other economic good news. While annual inflation has fallen, voters don’t necessarily gauge inflation by how much it has increased over the past 12 months but might more broadly compare how much goods and services are now to how much they were before Biden entered office.