`President Donald J. Trump announced the nomination of Jerome Powell to be Chairman of the Board of Governors of the Federal Reserve System | November 2, 2017. Source: The White House via Flickr.Jerome Powell now has exactly what he needed to justify staying on the sidelines. On Thursday, the Commerce Department reported that both headline and core PCE inflation figures for June came in hotter than expected.
The monthly PCE index rose 0.3%, up from 0.1% in May, while the annual rate hit 2.6%, an increase from 2.3% the month before. The core PCE reading, which strips out food and energy, also came in at 0.3% month-over-month and 2.8% year-over-year, edging higher from 2.7%.
All these numbers beat Wall Street expectations, giving Powell and his fellow Fed officials new reasons to hold interest rates where they are.
This update landed one day after the Federal Reserve kept its benchmark interest rate unchanged for a fifth straight time, still locked between 4.25% and 4.5%.
While policymakers have been signaling patience, these figures now suggest inflation is no longer cooling the way it had been. And with pressure building from the White House’s tariff strategy, no one at the Fed seems in a hurry to cut rates anytime soon.
Trump rips Powell again as inflation data lands
As the PCE numbers dropped, President Donald Trump once again wasted no time taking shots at Powell on Truth Social. He called him “TOO LATE, TOO STUPID, & TOO POLITICAL,” and claimed the Fed Chair is costing the U.S. “TRILLIONS OF DOLLARS.” Trump added, “Put another way, ‘Too Late’ is a TOTAL LOSER, and our Country is paying the price!”
The post dropped hours before the inflation figures were released, with Trump continuing a months-long streak of attacking Powell publicly. He’s blamed the Fed Chair repeatedly for lagging behind on rates and for mishandling the central bank’s headquarters renovation.
Behind the noise, the Fed is clearly watching how Trump’s tariffs are filtering into the economy. Chair Powell said Wednesday the committee is in no rush to act and will “wait and see” how these trade policies influence growth and inflation. He also said the Fed is ready to respond fast if the economy shows signs of a weakening labor market or rising prices.
The Commerce Department report didn’t give much relief. Prices for goods rose 0.6% compared to June 2024. Durable goods were up 0.9%, while nondurable goods climbed 0.5% year-over-year. Service prices, which have remained sticky throughout this cycle, increased 3.5% from a year earlier.
That service inflation is one of the reasons core PCE remains stubbornly above the Fed’s 2% target. Policymakers view the core reading as the more accurate inflation barometer, and it’s now moving in the wrong direction again.
Fed watches wages and savings as markets react to inflation print
Wage growth didn’t do much to ease concerns either. Wages and salaries only rose 0.1% month-over-month, the slowest pace since November 2024. That sluggish paycheck growth could become a red flag if it drags on too long, especially with service costs still climbing.
Meanwhile, the personal savings rate was flat at 4.5%, showing no improvement from May. Americans are still saving less than before the pandemic, a sign that high prices and sticky costs are squeezing household budgets.
Crypto traders also kept a close eye on gold, which jumped as the inflation data fueled new uncertainty over rate cuts. With Trump’s August 1 deadline to close trade negotiations looming, many moved into safer bets.
Spot gold was up 1% to $3,308.07 per ounce as of 8:55 a.m. ET, while U.S. gold futures added 0.3% to hit $3,306.10. The rush into gold shows that the market still sees plenty of risk ahead, especially with inflation pushing up again and Trump’s tariff war adding fuel.
