US Core Inflation Holds Steady, Despite Surprise Headline Jump
The US July Personal Consumption Expenditures (PCE) report revealed core PCE inflation at 3.3% year-over-year, matching market expectations. The headline PCE index rose to 3.7%, surpassing forecasts of 3.6%. This data arrives amid heightened uncertainty regarding potential Federal Reserve rate hikes, with a 35% probability priced in for September 16.
Despite some unexpected spikes in the core reading, most analysts see no cause for alarm. The Fed's persistent concern over inflation has been exacerbated by recent economic developments, such as booming data center spending and ongoing tensions with Iran.
New Chairman Kevin Warsh has emphasized the need to meet the 2% inflation target, a goal the Fed has missed for five years. With these numbers in mind, Warsh has set his sights on addressing this pressing issue.