Fed Stays the Course on Interest Rates Amid Easing Inflation

Federal Reserve policymakers are likely to leave interest rates unchanged next month after data showed inflation cooled on a year-over-year basis for a second straight month. The Consumer Price Index rose 3.4% in the 12 months through July, down from 3.5% in June, according to the Bureau of Labor Statistics.

Omair Sharif, founder of Inflation Insights, noted that underneath the hood, there were some indications of broadening inflation. Technology prices jumped due to demand for artificial intelligence, while gasoline prices fell, pushing down on overall inflation.

The Fed targets 2% inflation by the 12-month change in the Personal Consumption Expenditures Price Index. Sharif and most other analysts estimate that even with the deceleration in year-over-year CPI last month, the Fed's preferred measure of underlying inflation, core PCE, still looks on course to be a bit above 3%.

Some policymakers may still consider raising interest rates given still-too-high inflation. Last month, three dissenters voted to leave the U.S. central bank's benchmark interest rate in the 3.50%-3.75% range, where it has been since December.