United States consumer prices rose modestly in July, while the Federal Reserve's preferred measure of underlying inflation remained elevated, reinforcing uncertainty over the central bank's next policy move.
The personal consumption expenditures (PCE) price index increased 0.2% on a seasonally adjusted basis in July, taking the annual inflation rate to 3.7%, according to the Commerce Department. Both readings were 0.1 percentage point above the Dow Jones consensus.
Excluding volatile food and energy prices, core PCE rose 0.2% for the month and 3.3% annually, both in line with expectations. While the Fed monitors both measures, policymakers generally regard core inflation as a better gauge of underlying price trends.
The report also showed personal income increased 0.4% in July, while consumer spending rose 0.2%, with both figures exceeding forecasts.
Goods prices fell 0.1% during the month, led by a 2.7% decline in gasoline and other energy-related goods and a 0.9% drop in furnishings and durable household equipment.
Services prices increased 0.3%, driven by a 1.2% rise in financial services and insurance and a 0.3% gain in housing costs.
The data come as Fed officials assess their next policy move, with inflation still well above the central bank's 2% target despite relatively subdued monthly readings in recent months.
The rate-setting Federal Open Market Committee does not meet in August, giving policymakers time to assess incoming data before its next meeting on 15-16 September.
According to the CME Group FedWatch Tool, markets are currently pricing in roughly a 36.5% chance of a rate move at that meeting.
Fed officials are gathering this week in Jackson Hole, Wyoming, for the central bank's annual symposium. The main focus will be Fed Chair Kevin Warsh's policy speech on Friday.
Since taking office in May, Warsh has remained cautious about signalling the direction of monetary policy, instead allowing economic data and market conditions to shape expectations.
Government bond yields have also climbed in recent weeks, with 10-year and 30-year Treasury yields recently reaching their highest levels since 2007.
The rise has reflected concerns over the Fed's commitment to its inflation target, as well as mounting debt and deficit pressures in the federal budget.
Treasury Secretary Scott Bessent announced last week that the department would increase its purchases of government debt through buybacks. However, investors have questioned whether the initiative will have a meaningful impact on Treasury yields.
