PCE Price Index Rises to 3.7%, Boosting Fed Rate Hike Odds

The July inflation report has shown that the personal consumption expenditures price index (PCE) rose to a 3.7% annual rate in July, up from 3.6% in June.

This increase adds weight to the case for a Federal Reserve interest-rate hike, as the Fed targets inflation at 2%.

Core PCE inflation, which excludes volatile food and energy prices, remained at 3.3% from a year earlier, unchanged from June.

Market expectations for a rate hike have increased, with Fed funds futures now implying about a 44% probability of a September rate increase, up from roughly 36% just before the data release.