Fed-Target Inflation Remains Elusive Amid Ongoing Trade Tensions

The personal consumption expenditures price index, a key inflation gauge watched by the Federal Reserve, remained elevated in July despite falling gas prices.

Prices rose 3.7% in July compared to a year earlier, matching June's figure and significantly above the Fed's target of 2%. The Iran conflict and ongoing US trade disputes have kept gas prices high, with President Donald Trump threatening new tariffs on Canada and China.

The Commerce Department's report also showed that core inflation, excluding food and energy costs, was unchanged at 3.3% in July. However, the Fed's target for core inflation is around a 0.2% monthly increase, which would be seen as a reassuring sign of inflation returning to normal.

The PCE index will be revised lower next month due to changes in how it calculates financial advice and software prices, which have been criticized by analysts for not accurately reflecting consumer spending habits.