The Fed’s preferred inflation gauge cooled in June. It might not last | CNN Business

The temporary truce in the war with Iran sent gas prices – and thus inflation – lower in June, providing some fuel for a crucial economic engine: the American consumer. The welcome readings, however, are likely temporary. Overall inflation fell in June for the first time in six years. The Personal Consumption Expenditures price index – the gauge used by the Federal Reserve for its target inflation rate – dropped 0.1% from May, bringing the annual rate to 3.7% from 4.1%, Commerce Department data showed. That reprieve helped to buoy household finances. Inflation-adjusted consumer spending rose 0.4% last month, matching an 11-month high, according to new data released Thursday by the Commerce Department. The inflation slowdown was largely driven by energy prices, particularly those at the fuel pump, which tumbled amid a false dawn in the Middle East war: In mid-June, the US and Iran reached a Memorandum of Understanding and ceasefire that later fell apart. Gasoline and energy goods prices sank 9.2% in June, the largest monthly drop since August 2022. But prices have since shot higher, and the national average is back above $4 a gallon – a critical threshold for consumer psyc