Inflation Rises to 3.7% in July, Putting Pressure on Fed Rate Decisions
US inflation rose to 3.7% in July, exceeding expectations and sparking concerns about the Federal Reserve's interest rate decisions. The Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, increased by 0.2% in July from the previous month.
The core PCE inflation rate, which excludes food and energy prices, also rose 0.2% monthly and 3.3% yearly, matching forecasts. This mixed picture gives the Federal Reserve a tough decision to make at its next policy meeting on September 15-16.
Despite falling goods prices, higher service costs are keeping pressure on inflation. Financial markets are pricing in about a one-in-three chance of a rate move at the September meeting, with investors expecting no immediate major change in Fed policy.