PCE Inflation Stalls as Iran Conflict and Debt Concerns Mount

The latest inflation report from the Federal Reserve's preferred metric, the Personal Consumption Expenditures Price Index (PCE), was steady in July, rising at a 3.7% year-over-year rate.

The PCE, which strips out food and energy for a cleaner read on the trend, held at a slightly softer 3.3%.

While the report wasn't surprising, it's revealing, suggesting that counting on disinflation to prevail in the near term looks more remote.

Economic activity is slowing, but the data is mixed, and it may take several months to develop a cleaner reading on the macro trend.

The Iran conflict is one of the offsetting factors keeping energy prices elevated, delaying meaningful disinflationary relief.

Additionally, the bond market's growing concern over U.S. government debt and the lack of political efforts in Congress to tackle the mounting red ink is a potentially bigger problem for inflation.