US Inflation Gauge Remains Elevated Amid Ongoing Trade Fights

The Federal Reserve's closely watched inflation gauge remains elevated, despite some signs of cooling in recent months. According to the Commerce Department's report on Wednesday, prices rose 3.7% in July compared to a year earlier, matching June's figure and staying above the Fed's target of 2%. The personal consumption expenditures price index, or PCE index, is running hotter than the more widely followed consumer price index.

The inflation measure has worsened since the US and Israel attacked Iran in late February, when it stood at 2.9%. Excluding volatile food and energy categories, core inflation was unchanged at 3.3% in July. Some Fed officials see core prices running at about 0.2% a month as a reassuring sign that inflation is heading back to the target.

However, economists have noted that the PCE index has been pushed higher by the way it calculates financial advice and software costs. To address this issue, the Commerce Department plans to adjust its measurements starting next month, which could lower measured inflation by 0.2 percentage points or more.