Fed’s Preferred Inflation Gauge Shows Core Prices Rose 3.3% Annually in July The Federal Reserve’s primary measure of inflation, the personal consumption expenditures price index, indicated a slight rise in prices for goods and services in July. The index, which the Fed uses to guide monetary policy, increased by 0.2% on a seasonally adjusted basis for the month, pushing the annual inflation rate to 3.7%, according to the Commerce Department. Both the monthly and annual figures exceeded the Dow Jones forecast of 0.1 percentage point. When excluding volatile food and energy costs, core PCE prices rose 0.2% monthly and 3.3% annually, aligning with expectations. Federal Reserve officials typically prioritize core inflation as a more reliable indicator of long-term price trends. The report also revealed that personal income grew 0.4% in July, while spending increased 0.2%, both stronger than anticipated. Goods prices declined slightly on a monthly basis, falling 0.1%, driven by a 2.7% drop in gasoline and other energy-related items, as well as a 0.9% decrease in furnishings and durable household goods. Services prices, however, rose 0.3%, fueled by a 1.2% increase in financial services and insurance and a 0.3% gain in housing costs. Market reactions to the report included a slight pullback in stock market futures, while Treasury yields rose. Investors are closely watching the Federal Reserve as inflation remains above its 2% target, despite softer monthly readings this summer. The Fed’s rate-setting Federal Open Market Committee (FOMC) does not meet formally in August, giving officials a brief reprieve before their next gathering on September 15-16.#scott_bessent #federal_reserve #kevin_warsh #commerce_department #jackson_hole_symposium
High Gas Prices Drive Inflation to Three-Year High The U.S. annual inflation rate surged to its highest level in three years in May, according to data released by the Commerce Department on Thursday. The rise was largely attributed to elevated gas prices, which have been a significant factor in the broader inflation picture. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, climbed to 4.1% in May from 3.8% in April. On a monthly basis, the PCE index remained unchanged at 0.4%, reflecting a stable trend in overall price increases. However, when excluding the most volatile components—gas and food prices—the so-called core inflation, which excludes these categories, rose at a slower annual rate of 3.4% compared to 3.3% in April. This core inflation rate, which is closely watched by the Federal Reserve, indicates that underlying price pressures remain relatively contained. The inflation figures largely aligned with economists’ expectations, as per FactSet’s consensus estimates. The data comes at a critical juncture for Federal Reserve policymakers, who have expressed caution about cutting interest rates amid persistent concerns over inflation. The central bank has signaled a willingness to wait for further evidence that inflation is cooling, rather than acting preemptively. Financial markets, however, are currently pricing in the possibility of rate hikes later this year. President Donald Trump has consistently advocated for rate cuts, and his recent appointment of a new Fed chairman who shares his economic philosophy has added to the debate. Yet, the stronger-than-expected inflation readings have delayed the timeline for potential rate reductions.#strait_of_hormuz #federal_reserve #commerce_department #personal_consumption_expenditures #heather_long
