US Inflation Gauge Remains Elevated Amid Global Trade Tensions
The Commerce Department's PCE price index, a key inflation gauge watched by the Federal Reserve, remained elevated in July. Despite a decline in gas prices, overall prices rose 3.7% compared to last year, matching June's figure. This marks a significant increase since the US and Israel attacked Iran in late February, when inflation stood at 2.9%. The Fed targets an inflation rate of 2%, which is noticeably above its current level.
Excluding volatile food and energy categories, core inflation was also unchanged at 3.3% in July. This figure had fallen to 2.6% before President Donald Trump imposed sweeping tariffs in April. On a monthly basis, overall prices rose 0.2% from June to July, after declining 0.1% the previous month and jumping 0.5% in May.
The inflation gauge will be revised lower next month due to planned changes by the Commerce Department in how it calculates the cost of financial advice and software prices. Economists forecast that these adjustments will reduce annual PCE inflation by 0.2 percentage point or so.