Inflation Remains Elevated Above Fed Target Amid Ongoing Trade Tensions and Iran Conflict

The Commerce Department's personal consumption expenditures price index (PCE) showed that inflation remained elevated in July, rising to 3.7% compared to a year earlier.

This is the same rate as June and significantly above the Federal Reserve's target of 2%. The PCE index has been pushed higher by the way it calculates the cost of financial advice and software prices, which economists say may not fully capture what Americans pay for these services.

The Commerce Department plans to adjust its measurements next month, which is expected to lower annual PCE inflation by around 0.2 percentage point.

Gas prices have rebounded this month, pushing up inflation when the August figures are reported. Consumer spending and business investments remain robust, but Americans may be turning more cautious as inflation stays high.