Fed-favored PCE inflation gauge falls for first time since pandemic, but danger far from over

U.S. inflation showed a rare cooling in June as the Fed’s preferred PCE price index fell 0.1%, its first monthly decline since 2020. The drop was driven largely by lower gasoline prices after a temporary truce with Iran, which reduced energy costs and pulled headline inflation lower. The report supports the Federal Reserve’s decision not to raise rates this week, but the article emphasizes that inflation risks remain and the broader fight is far from over. Market implications are modestly supportive for risk assets and rate-sensitive markets, but the move appears driven by an energy-price shock rather than a durable disinflation trend.