People shop for groceries at a supermarket in Manhattan, New York City, August 25, 2026.
Angela Weiss | AFP | Getty Images
The prices consumers pay for a variety of goods and services rose slightly in July, according to the Federal Reserve’s key inflation measure.
The Consumer Expenditure Price Index, the Federal Reserve’s preferred forecasting tool, rose a seasonally adjusted 0.2% in the month, bringing annual inflation to 3.7%, the Commerce Department said Wednesday. Both were 0.1 percentage points above the Dow Jones consensus.
However, excluding volatile food and energy costs, core PCE recorded increases of 0.2% and 3.3%, respectively, in line with expectations. The Fed considers both measures, but policymakers generally view core inflation as a better measure of long-term trends.
The report also showed personal income rose 0.4% and spending rose 0.2%, both better than expected.
In fact, commodity prices fell by 0.1% during the month, driven by a 2.7% decline in gasoline and other energy-related products and a 0.9% decline in furniture and long-term household appliances.
Services prices rose 0.3%, driven by a 1.2% rise in financial services and insurance and a 0.3% rise in housing prices.
Stock market futures fell slightly on the report, but U.S. Treasury yields rose.
The report comes as Fed officials consider their next policy moves despite generally weak monthly data this summer, which remains well above the central bank’s 2% target.
The Federal Open Market Committee, which sets interest rates, won’t formally convene in August, giving officials some time off before making a decision at its next meeting on Sept. 15 and 16. The market is currently pricing in only about a third of the chances of a rate hike, and the best chance for a rate hike will be in December.
Although the FOMC will not be held, Fed officials gathered in Jackson Hole, Wyoming, this week for their annual symposium, the highlight of which will be Chairman Kevin Warsh’s policy speech scheduled for Friday.
Mr. Warsh has been cautious about policy direction since taking office in May, preferring to let markets dictate direction.
Government bond yields have been trending upward recently. Yields on 10-year and 30-year bonds recently reached their highest levels since 2007, just before the global financial crisis. The surge stems from a variety of factors, including the Federal Reserve’s commitment to achieving its inflation target and investors’ concerns about the federal budget’s debt and deficit problems.
A week ago, Treasury Secretary Scott Bessent announced his department’s efforts to ramp up bond repurchases. However, market participants have expressed doubts about whether this move will have a meaningful impact on yields.
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