The personal consumption expenditures (PCE) price index rose 1.0% last month, the biggest increase since September 2005, after rising 0.6% in May. In the 12 months to June, the PCE price index rose 6.8%, the biggest rise since January 1982.
Excluding volatile food and energy components, the PCE price index rose 0.6% after rising 0.3% in May.
“The dollar seems to have improved a bit against its peers because the PCE effectively indicates that inflation has not necessarily cooled for personal items, which gives the Fed enough room to rise as it has been telegraphing,” said Juan Pérez, director of operations for Monex USA in Washington.
Another key indicator, the US Employment Cost Index (ICE), also increased. The ICE, the broadest measure of labor costs, rose 1.3% last quarter, after accelerating 1.4% in the January-March period, the Labor Department reported on Friday.
The index is considered one of the best indicators of the responsiveness of the labor market and of core inflation, as it adjusts for changes in the composition and quality of employment. It is closely watched to see if wage growth has peaked.
Action Economics, blogging after the data, said that ECI was one of the metrics that alarmed the Fed and prompted its pivot to a 75 basis point hike.
Friday’s reports somewhat overrode second-quarter US Gross Domestic Product contraction data released the day before, which led to a pullback in rate hike expectations.
In morning trading, the dollar index, a measure of its value against six currencies, was up 0.4% at 106.60, after falling to a three-week low of 105.53.
The euro was down 0.4% at $1.0155. Against the yen, the dollar was up 0.1% at 134.38 yen.
Source: Ambito
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