The Fed: Fed chief Powell says he thinks core inflation picked up a bit in June

Fed Chairman Jerome Powell said Tuesday that Fed officials think core PCE inflation was 1.7% in June, up from 1.6% in May. The government won’t release the data until the end of the month. Read More...

Federal Reserve Chairman Jerome Powell spoke at a dinner in Paris organized by the Bank of France.

Federal Reserve Chairman Jerome Powell said Tuesday that the central bank now estimates that a key measure of core inflation increased in June to its highest level in four months but added that, despite the acceleration, inflation pressures “remain muted.”

In a speech to the Bank of France in Paris, Powell said the Fed currently estimates the change in the so-called core personal consumption expenditure (PCE) price index was 1.7% over the 12-months ended June. That is up from 1.6% in May and 1.5% as recently as March. The PCE price index is the Fed’s favorite measure of price changes.

A 1.7% annual gain in core PCE would be the highest since February. Core PCE inflation last hit the Fed’s 2% annual target last July, the first time it had hit the target since 2012.

The June estimate is remarkable mainly because it comes in advance of the official government release of the June PCE data, which won’t be made public until July 30, the first day of the Fed’s next interest-rate-setting meeting.

In his speech, Powell reiterated that the economic outlook hasn’t improved since the last Federal Open Market Committee meeting in June, setting the stage for an interest-rate cut.

Low inflation, combined with uncertainties of trade policies and global growth, “strengthens the case for a somewhat more accommodative stance of policy,” Powell said, in testimony before House and Senate committees last week

Read: Powell says trade worried restraining the economy, hints at interest-rate cuts soon

Investors are pricing in a 100% chance of a quarter-point rate cut after the FOMC meeting ends on July 31. They see a 30% chance of a half-point cut, according to the CME Group’s FedWatch tool.

In an interview with the Washington Post on Tuesday, Dallas Fed President Rob Kaplan seemed to suggest he would not support a half-point cut, saying he might favor “a modest tactical adjustment” down in interest rates.