Friday, June 26, 2026 at 11:30 PM
Original source
Econbrowser
MacroLab briefing generated by AI for informational purposes. Original reporting by Econbrowser. Not financial advice.
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On June 26, the government released early estimates showing that US inflation in June fell compared to May, but the decline was small. The measurement used here is called the PCE deflator (Personal Consumption Expenditures deflator), which tracks how much prices are rising for the things Americans buy. There are two versions: headline inflation includes everything, including volatile food and energy prices; core inflation excludes food and energy to show the underlying trend. The headline number improved noticeably, but core inflation, which is what the Federal Reserve focuses on most, barely budged downward.
Inflation is when your money buys less stuff because prices keep going up. If inflation falls, that's generally good news because it means prices are stabilizing and the purchasing power of your paycheck isn't eroding as quickly. However, if core inflation isn't falling much, it suggests that the underlying cost pressures in the economy are sticky and hard to fix. This matters because the Federal Reserve, which controls interest rates, uses inflation data to decide whether to keep raising rates (to cool down the economy and bring prices down) or start lowering them (to help borrowers). If core inflation stays stubbornly high, the Fed may need to keep rates elevated longer, which makes mortgages, car loans, and credit card rates more expensive for regular people.
Watch whether core inflation continues to creep down in the coming months, or if it flattens out. If it keeps falling steadily toward the Fed's 2 percent target, that signals the problem is actually getting better and the Fed might eventually cut rates. If it stalls or ticks back up, that suggests the Fed will need to keep rates high for much longer, which would keep borrowing costs painful and could slow job growth. Also watch what happens to energy and food prices (which make up headline inflation), since those are outside the Fed's control but strongly affect what people feel in their wallets at the pump and grocery store.