UPDATE 2 - Fed's preferred annual inflation indicator unchanged at 2.6% in June, above 2.5% estimates

UPDATES WITH PRESIDENT JOE BIDEN'S COMMENTS

By Ovunc Kutlu

ISTANBUL (AA) - The US Federal Reserve's preferred annual inflation indicator remained unchanged at 2.6% in June, according to Commerce Department figures released Friday.

The figure came in slightly higher than market expectations of 2.5%, while the core personal consumption expenditures (PCE) price index annually rose 2.6% in May.

On a monthly basis, the core PCE price index increased 0.2% in June, gaining pace from a 0.1% month-on-month increase in May, and came in line with market estimates.

The PCE price index, which includes food and energy prices, annually rose 2.5% in June, slightly slowing from a 2.6% annual gain in May, also coming in line with expectations.

That index, on a monthly basis, increased 0.1% in June, after remaining unchanged in May, and coming also in line with estimates.

The slight gains in PCE and core PCE figures are not expected to change investors' anticipation that the Fed's first interest rate cut is widely expected to come in September.

The Fed has made a total of 11 interest rate increases between March 2022 and July 2023 to tame the record inflation, carrying the federal funds rate to the 5.25%-5.5% target range – the highest in 22 years.

The US central bank skipped four rate hikes last year, and four more this year.

The Commerce Department's Bureau of Economic Analysis said prices for goods decreased by 0.2% in June, compared to the previous month, but prices for services rose 0.2%.

"Food prices increased 0.1 percent and energy prices decreased 2.1 percent," it said in a statement.

Annually, prices for goods fell 0.2% in June, from the same month of last year, but prices for services jumped 3.9% year-on-year.

"Food prices increased 1.4 percent and energy prices increased 2.0 percent," on an annual basis, it added.

There was a 0.2% increase in real PCE during the month of June, which reflected a 0.2% gain in spending on goods and a rise of 0.2% in spending on services, the agency noted.

"Within goods, the largest contributor to the increase was recreational goods and vehicles, led by information processing equipment," said the statement.

"Within services, the largest contributor to the increase was housing and utilities," it added.

President Joe Biden said the recent data shows the US is making real progress in the fight against inflation.

"Over the last year, inflation has come down to 2.5% at a time when the economy has grown 3.1%, we’ve created 2.6 million new jobs, and wages are rising faster than prices," he said in a statement released by the White House.

"The agenda that Vice President Harris and I are fighting for has helped us come back strong from the worst economic crisis since the Great Depression and deliver for working families," he added.

Biden said his administration will continue to lower costs for all Americans by capping prescription drug costs and building more homes and ensuring lower rents.

The president argued that Congressional Republicans would "reignite" inflation by giving more massive tax cuts to the ultra-wealthy, while raising costs for working families by taxing all imports.