Key U.S. Inflation Gauge Rises Slightly

The Federal Reserve’s preferred inflation gauge climbed a little higher last month, with prices rising 2.6% in June compared with a year ago.

The Commerce Department reported Thursday prices were up from an annual pace of 2.4% in May. Excluding the volatile food and energy categories, prices rose 2.8% in the past year, the same as the previous month, which was revised higher.

Those figures are above the Fed’s 2% target rate.

That rise in prices led to the Fed’s decision to not cut its key interest rate this week. On Wednesday, the Fed left its key rate unchanged at 4.3%, and Fed Chair Jerome Powell suggested it could take months for the central bank to determine whether the import duties will cause just a one-time rise in prices, or a more persistent increase in inflation, according to a report from The Associated Press.

On a monthly basis, prices ticked up 0.3% from May to June, while core prices also rose 0.3%. Both figures are higher than consistent with the 2% target.

“The above-target rise in core prices in June, upward revisions to previous months’ data and the sharp rise in core goods inflation will do little to ease the Fed’s concerns about tariff-driven inflation,” Harry Chambers, assistant economist at Capital Economics, a forecasting firm, told the AP. “If these pressures persist, as we expect, a September cut looks unlikely.”

The government’s measure of gas prices rose 0.9% from May to June, while grocery costs rose 0.3%. Many longer-lasting goods that are heavily imported saw clear price increases, with furniture prices up 1.3% just last month, appliances up 1.9%, and computers up 1.4%.

The cost of some services fell dramatically last month, offsetting some of the price pressures from goods. Air fares dropped 0.7% from May to June, while the cost of hotel rooms plunged 3.6% just in one month.

According to Thursday’s report, consumer spending rose 0.3% from May to June, a modest rise that suggests Americans are still spending cautiously. Adjusted for inflation, the increase was just 0.1%, the government said.