The Federal Reserve’s preferred inflation gauge moved slightly higher in July, though core price pressures remained in line with expectations as central bank officials weigh their next policy move.
The personal consumption expenditures price index rose a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 3.7%, the Commerce Department reported Wednesday. Both figures came in 0.1 percentage point above the Dow Jones consensus forecast.
Stripping out volatile food and energy costs, core PCE posted gains of 0.2% for the month and 3.3% on an annual basis, matching expectations. While the Fed tracks both measures, policymakers generally view core inflation as the better gauge of longer-term trends.
Income and spending beat forecasts
The report also showed personal income rose 0.4% in July while consumer spending increased 0.2%, with both figures coming in stronger than anticipated.
Beneath the headline numbers, goods prices actually declined on the month, falling 0.1%, driven by a 2.7% decrease in gasoline and other energy-related goods as well as a 0.9% drop in furnishings and long-lasting household equipment.
Services prices, by contrast, rose 0.3%, boosted by a 1.2% increase in financial services and insurance and a 0.3% gain in housing.
Markets react
Stock market futures pulled back a bit following the report while Treasury yields moved higher.
The data arrives as Fed officials confront an inflation rate that, despite generally soft monthly readings through the summer, remains well above the central bank’s 2% target.
With the rate-setting Federal Open Market Committee not meeting formally in August, policymakers have a brief respite before deciding on their next move at the gathering scheduled for Sept. 15-16. Markets are currently pricing in only about a 1-in-3 probability of a rate move at that meeting, with the best chance for a hike coming in December.
Jackson Hole in focus
Though the FOMC isn’t meeting this month, Federal Reserve officials are gathering this week in Jackson Hole, Wyoming, for their annual symposium. The highlight is a policy speech scheduled for Friday from Chairman Kevin Warsh.
Since taking office in May, Warsh has been circumspect about where he sees policy heading, instead preferring to let markets set the tone.
The inflation backdrop is not the only factor weighing on market sentiment. Government bond yields have been on the rise recently, with both the 10- and 30-year Treasurys hitting their highest levels since 2007, just before the global financial crisis. The surge stems from a variety of factors, including investors’ concerns about the Fed’s commitment to its inflation target as well as debt and deficit issues with the federal budget.
Treasury Secretary Scott Bessent a week ago announced an initiative in which his department would step up its buybacks of government debt. However, market participants have expressed doubt about whether the move will meaningfully impact yields.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/26/feds-preferred-inflation-gauge-shows-core-prices-rose-3point3percent-annually-in-july.html
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