Inflation Stays Stubbornly High as Consumers Pull Back
July's PCE price index rose 3.7% annually, the Commerce Department reported Wednesday. Core PCE — excluding food and energy — held at 3.3%, matching forecasts.
- 0.2% monthly gain for both overall and core PCE in July.
- 3.7% annual PCE is up from 2.9% when the Iran war began in late February.
- Odds of a Fed rate hike at the next meeting rose above 40% after the report.
- The economy lost 23,000 jobs in July, a surprise to the downside.
Why it matters: Inflation has exceeded the Fed's 2% target for more than five years. The July data does not clearly resolve an internal split at the Fed over whether to hold or raise rates.
- Gas prices have rebounded in August, likely pushing inflation higher when next month's figures are released.
- Persistent inflation is shaping up as a central issue in November's midterm elections.
How 12 sources split on this story
Where they split: The core dispute is whether the Fed should raise rates now to fight persistent inflation or hold to avoid choking a softening labor market.
Center coverage, 7 sources: The center focuses on the data relative to expectations — core PCE in line with forecasts — and on what the numbers mean for the Fed's next rate decision.
CNBC3hFed’s preferred inflation gauge shows core prices rose 3.3% annually in July
Associated Press3hKey inflation gauge remains elevated during Iran war and ongoing US trade fights
Reuters2hUsa, inflazione ancora persistente a luglio, Pil trim2 invariato a 1,5%IBTIBTimes1hThe Fed's Preferred Inflation Gauge Rose In July. Expectations Of a Rate Hike Edged Up.
Forbes2hFed’s Preferred Inflation Meter Unchanged In July—Here’s Why Interest Rates Hikes Are Now More Likely
The Hill3hFed’s preferred inflation gauge remains flat at 3.7 percent in JulyYNYahoo News2hFed seen a bit more likely to hike after inflation dataLeft coverage, 3 sources: The left frames the report as evidence of persistent consumer hardship, emphasizing that inflation remains stuck above target despite years of Fed action.
Right coverage, 2 sources: The right frames elevated inflation as a direct political liability for Trump and Republicans heading into midterms, tied to the Iran war and unresolved affordability pressures.
What’s next: Fed Chair Kevin Warsh speaks Friday in Jackson Hole; Wall Street is watching for rate signals.
- FOMC minutes show members said rate hikes would be needed if inflation does not cool.
- Will Warsh's Jackson Hole speech signal a rate hike at the September meeting?
- How much will rebounding gas prices push August's PCE reading above 3.7%?
- Does the July jobs loss mark the start of a broader labor market slowdown?