In June, a crucial inflation gauge that the Federal Reserve monitors closely, the Personal Consumption Expenditures price index, only increased modestly.
The core PCE inflation, excluding volatile energy and food prices, inched up by 0.18% month-over-month, slightly more than the 0.16% anticipated.
Despite the increase, the core PCE reading stayed unchanged at 2.6% year-on-year, boosted by core PCE figures for May being revised upward, and was adjusted to 0.13% from an initial 0.08%.
Personal income growth came in weaker than expected, increasing month-over-month by only 0.2%.
Citi analysts believe Fed officials will still start a series of rate cuts in September.
Analysts at Wells Fargo said this was the last major indicator before the Fed meeting next week and although there was plenty to evaluate, there was nothing that would need rates to be cut in the July meeting or would prevent one in September.
Bank of America said the report was another tick in the box. Inflation was back on track towards the target of 2% even if base effects would increase the y/y rate in the second half of this year. The likelihood of a rate cuts therefore continues to rise.
BofA added that strong GDP growth and solid spending meant the Fed could be patient and await more data.
