Key Takeaways
- US Core PCE inflation slowed to 0.1% month-over-month in June, bringing the annual rate down to 3.3% and providing the Federal Reserve with evidence of cooling price pressures.
- Mastercard (MA) shares rose 2.8% in premarket trading after reporting Q2 adjusted EPS of $5.04 on revenue of $9.3 billion, both of which exceeded Wall Street estimates.
- US GDP growth for Q2 2026 was reported at 1.5% in the advance estimate, a deceleration from the 2.1% growth seen in the first quarter, though consumer spending remained robust at 3.2%.
- The Bank of England maintained interest rates at 3.75% in a 6-3 vote, with Governor Andrew Bailey noting a "broader slowing" in domestic inflation despite ongoing global uncertainties.
- German preliminary CPI rose to 2.8% year-over-year in July, driven by a sharp 8.3% spike in energy prices, highlighting persistent inflationary risks in Europe's largest economy.
US Inflation Shows Signs of Moderation
The Federal Reserve's preferred inflation gauge, the Core PCE Price Index, rose just 0.1% in June, coming in below the 0.2% analyst estimate. On an annual basis, core inflation eased to 3.3%, down from 3.4% in May, marking a significant step toward the central bank's 2% target. Headline PCE, which includes volatile food and energy costs, actually declined 0.1% for the month, pulling the year-over-year rate down to 3.7% from 4.1%.
Market participants viewed the data as a "relief valve" after months of stubborn price growth, potentially opening the door for the Fed to consider interest rate cuts later this year. Despite the cooling inflation, Personal Income and Spending both grew by 0.3%, suggesting that while consumers are facing higher costs, their underlying demand remains resilient.
Mastercard Beats Estimates Amid Spending Resilience
Mastercard (MA) delivered a strong second-quarter performance, powered by a 12% increase in cross-border volumes and a 10% rise in purchase volume, which reached $2.42 trillion. The company reported net revenue of $9.3 billion, a 14% increase year-over-year, while adjusted EPS of $5.04 comfortably beat the consensus estimate of $4.71.
CEO Michael Miebach highlighted the company's role in "powering more ways to shop and pay," noting that new partnerships and technological advances like Agentic Payments are driving growth. The payment giant also returned significant capital to shareholders, repurchasing 9.8 million shares for $4.9 billion during the quarter.
Economic Growth Decelerates While Labor Market Holds
The US economy expanded at an annualized rate of 1.5% in the second quarter, according to the Bureau of Economic Analysis's advance estimate. While this represents a slowdown from the 2.1% growth recorded in Q1, the report featured a bright spot in Personal Consumption, which surged 3.2%, far exceeding the 2.3% estimate.
In the labor market, Initial Jobless Claims for the week ending July 25 came in at 197,000, slightly higher than the previous week's 187,000 but still below the 200,000 forecast. Continuing claims edged lower to 1,782,000, suggesting that while the pace of hiring may be moderating, the floor for the labor market remains firm.
Global Central Banks Navigate Divergent Paths
Across the Atlantic, the Bank of England (BoE) opted to keep its benchmark rate at 3.75%, though the 6-3 vote revealed growing hawkishness among some members. Governor Andrew Bailey stated that while he sees a "broader slowing in domestic inflation," the bank remains ready to raise rates if second-round effects from Middle East conflicts persist.
Meanwhile, Germany's inflation data surprised to the upside, with the preliminary July CPI hitting 2.8%. This rebound from June's 2.3% was almost entirely driven by energy prices, which accelerated to an 8.3% annual growth rate. This divergence between cooling US core inflation and rebounding European headline figures continues to complicate the global monetary policy outlook.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.