Overview
- The Bureau of Economic Analysis reported on Wednesday that headline personal consumption expenditures inflation rose 0.2% in July and stood at 3.7% year‑over‑year while core PCE, which excludes food and energy, was up 0.2% for the month and 3.3% annually.
- Financial markets reacted by lifting the probability of a September Fed rate hike, with fed‑funds futures and Treasury yields moving to reflect a greater chance of tighter policy.
- Recent FOMC minutes and discount‑rate minutes showed a growing minority of Fed officials and some regional bank boards preferred tighter policy, a split the July data makes harder to close.
- Analysts say the stickiness in PCE reflects external price pressures from the Iran conflict and new tariff actions plus stronger personal income and spending that helped keep services inflation elevated.
- The key near‑term test is Fed Chair Kevin Warsh’s Jackson Hole address on Friday and the September FOMC meeting, which together will shape whether officials act to raise rates or hold policy steady and will affect borrowing costs and consumer prices next quarter.