Trend analysis based on the updated indicator.
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Core Overview: The latest data released by the US Department of Commerce shows that the latest (Q2 2026) US Core Personal Consumption Expenditures (Core PCE) price index year-over-year growth rate rose to 3.3%, showing an upward trend compared to the previous observation (Q1 2026) of 3.2%, with the result completely in line with the market consensus expectation of 3.3%. The latest data highlights that after excluding food and energy, underlying sticky inflation still persists, reaching its highest level since November 2023, indicating that the path to cooling inflation faces bumps.
Key Details: In terms of detailed performance, although the core PCE year-over-year growth rate increased, its month-over-month growth rate was only 0.2%, slightly below the market expectation and the previous value of 0.3%. However, high prices are eroding the real purchasing power of the public; inflation-adjusted real personal consumption expenditures increased only marginally by 0.1%, while the personal savings rate dropped significantly to a recent low of 2.6%. This reflects that consumers are forced to deplete their savings to maintain basic living expenses, and consumption momentum has shown signs of fatigue.
In-depth Attribution: According to institutional analysis, the primary cause of this widespread inflationary pressure lies in the energy price surge triggered by the conflict between the US and Iran, which drove the overall PCE year-over-year growth rate up to 3.8%. The high costs of fuel and raw materials are gradually transmitting to broader areas of the economy. TD Securities pointed out that despite signs of slowing inflation in supercore services, it was still offset by strong housing costs and some tariff pass-through effects, keeping core inflation stubbornly high.
Outlook and Risks: In the short term (1-2 months), the market will be highly focused on the subsequent developments of the US-Iran conflict and potential ceasefire agreements. If geopolitical risks fail to cool down effectively, the high-level fluctuations of crude oil prices will continue to pose upside risks to inflation. In the medium term (3-6 months), as the annualized quarter-over-quarter growth rate of US Q1 GDP was revised downwards to 1.6%, the hidden worry of stagflation—where "high inflation and economic slowdown" coexist—is gradually emerging. The new Federal Reserve Chairman Kevin Warsh faces a severe challenge; until inflation truly falls back to the 2% target, it may be difficult for the Federal Reserve to initiate a rate cut cycle.
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