As of June 2025, both core PCE (2.8%) and core CPI (2.9%) remain above the Federal Reserve's 2% inflation target, with recent data suggesting a potential stalling of disinflationary trends. The Fed, which held interest rates steady for the fifth consecutive meeting at 4.25-4.50%, continues to prioritize the less volatile core PCE as its primary gauge, acknowledging inflation as "somewhat elevated" while reaffirming its commitment to the 2% objective. This persistent elevation, despite the narrowing historical gap between core CPI and core PCE, underscores ongoing challenges in achieving price stability.
As of June 2025, core inflation metrics remain stubbornly above the Federal Reserve's target, with core PCE at 2.8% and core CPI at 2.9%, suggesting the recent disinflationary trend may be stalling. In response, the Federal Reserve has maintained its policy rate at 4.25-4.50% for the fifth consecutive meeting, signaling a prolonged period of restrictive monetary policy. The Committee's statement characterizes inflation as "somewhat elevated" while reaffirming a strong commitment to its 2% objective. The Fed's stated preference for the less volatile core PCE index over the core CPI helps explain its patient stance, even as both indicators have declined significantly from their 2022 peaks of 5.57% and 6.63%, respectively. Notably, the historical gap between the two measures has narrowed to just 14 basis points, compared to a long-term average of 48 basis points, indicating a convergence in the two key gauges of price pressure.
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mildly negative
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-0.25
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