Inflation Remains Above Target as Fed Faces Rate Hike Dilemma
US inflation has held steady at 3.7% for the 65th consecutive month, well above the Federal Reserve's target of 2%. The July consumer spending data showed a modest deceleration in growth and flatlined against inflation, while personal incomes rose faster than inflation.
Despite this, economists see an uptick in consumption as the year progresses. Orders for major capital goods rebounded last month, led by transportation equipment orders, and shipments of durable goods outside defense and aerospace sectors point to continued business investment in artificial intelligence.
The data suggests an acceleration in overall economic growth in the third quarter, with some economists predicting a rate of at least 3%. This has sparked debate within the Fed over whether interest rates should be lifted or held steady.