The Federal Reserve’s preferred inflation tracker showed a cooling trend in June, though it still sits far above the central bank's 2% target, a challenge that has fueled intense speculation about how new Chair Kevin Warsh might address it. The Commerce Department reported Thursday that the Personal Consumption Expenditures (PCE) price index fell 0.1% month-over-month in June, driven lower by a decline in energy prices. This brought the 12-month PCE inflation rate to 3.7%, down from 4.1% in May.

Excluding the volatile food and energy categories, the core PCE price index rose 0.1% month-over-month in June, with the 12-month core PCE inflation rate settling at 3.3%, slightly below May's 3.4%. The PCE inflation data rarely triggers market movements on its own. Wall Street traders can predict the reading with high precision, as the index heavily references inflation data released by the Labor Department earlier in the month. Nonetheless, as the Fed's primary inflation gauge, it remains a core foundation for traders speculating about the central bank's next move.

On Wednesday, the Fed held interest rates steady, ending speculation that this week's meeting might bring the central bank's first rate hike in three years. Warsh stated at the press conference that while the Fed is determined to curb inflation, the rise in market interest rates over the past few weeks has provided some breathing room for the central bank. However, the three dissenting votes in the 12-member policy committee in favor of a rate hike, coupled with Wednesday's sharp rise in long-term bond yields, indicate growing pressure on the Fed to act. Thursday's report also revealed that U.S. personal income in June grew 0.2% month-over-month, slightly below the 0.3% increase expected by economists surveyed by the media. Consumer spending rose 0.3% month-over-month in June, matching expectations.