In the second quarter inflation fell to 0.8 %, this from an upward-revised 1.4% in the first quarter. The lowest level on record for Core PCE inflation is 0.7 %. That was in the first quarter of 2009. Core PCE touched 0.7 % twice in the early 1960s, that is as far back as the data go.
“Although inflation remains well below Fed’s 2 % target, some signs that it is bottoming out. The core PCE index rose 0.22 % in June, and the year-to-year rate is now back up to 1.22 % from the 1.06 % reported a couple of months ago (mostly because of revisions). Over the next few months, inflation is likely to edge up. PCE health care service prices are likely to rebound from the first outright quarterly drop in over 50 years, and the hurdle for an increase in the year-to-year rate is low because we are dropping out very weak sequential inflation readings in 2012Q3.” (Goldman Sachs)