Inflation remained at 2.5% for the year ending in July, the Bureau of Economic Analysis reported Friday in an update to the personal consumption expenditures price index, the gauge favored by the Federal Reserve.
Inflation is now matching the lowest such rate since February 2021, just after President Joe Biden took office. It is some welcome news for Vice President Kamala Harris , as inflation is a top problem on voters' minds, although a further slowdown would have been even better news.
The new numbers are also significant for the Fed, which is now hoping to lower its interest rate target after years of trying to tamp down price pressures.
From June to July, inflation rose 0.2%, which is about in line with forecast expectations.
"This is a double dose of good news on inflation and economic growth," said Olu Sonola, head of U.S. economic research at Fitch Ratings. "Inflation prints are slowly but surely becoming boring again as this report continues the recent streak of benign core and headline inflation prints. Consumer spending continues to surprisingly exceed all expectations, a clear indication that the economy continues to be in good shape with solid above-trend growth."
Core PCE inflation, a measure of inflation that strips out volatile energy and food prices, remained at a 2.6% year-over-year rate.
PCE inflation is charting lower than the consumer price index, the most closely watched inflation gauge. The most recent reading of the CPI showed that inflation fell slightly to 2.9% for the year ending in July.
All inflation data are big news as the November elections approach. Harris has taken the mantle from Biden, who is not running for reelection but is still being weighed down by the administration's poor economic approval ratings.
Because of the high inflation, the Fed has been forced to hike interest rates to the highest level they have been since the dot-com bubble at the turn of the century. The higher rates have slowed the pace of inflation but have made it more unaffordable to take on debt and secure an auto loan or purchase a home.
Republicans are working to tie Harris to the economy under Biden. The Biden administration, meanwhile, has attempted to focus on positives in the economy, such as resilient hiring and robust GDP growth.
On Thursday, the Bureau of Economic Analysis reported GDP growth in the second quarter was revised up by 0.2 percentage points to a strong 3% seasonally adjusted annual rate.
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Still, the labor market, which has remained remarkably healthy despite the Fed hiking interest rates in response to inflation, has started to slow.
Job growth slowed to 114,000 in July, and the unemployment rate rose two-tenths of a percentage point to 4.3%, the Bureau of Labor Statistics reported.
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