Fed Faces Inflation Conundrum as US Growth Outlook Improves

US inflation remains above the Federal Reserve's target of 2% for the 65th consecutive month, holding steady at 3.7% in July.

The Commerce Department reported that the Personal Consumption Expenditures Price Index (PCE) rose by 0.2% from June to July, beating economists' forecast of a 0.1% increase.

Excluding energy and food prices, core PCE remained at 3.3%, while rising to 0.2% on the month from 0.1% in June.

The data suggests that consumer spending decelerated modestly last month, with personal incomes rising faster than inflation.