With longer-run inflation expectations within an arm's length of the Fed's 2% target, central bankers would likely feel more at ease bringing interest rates lower again later this year. At their meeting in June, the median Fed official penciled in two rate cuts, and some on the Fed's policy committee have advocated for cuts as soon as July.

U.S. households' inflation expectations were largely unchanged in June and they were more optimistic regarding their financial situation and access to credit in the year-ahead, results of a survey by the Federal Reserve Bank of New York showed on Tuesday.