US Inflation Remains Elevated Despite Cooling from Pandemic Peaks

An inflation gauge closely watched by the Federal Reserve has remained elevated in July, despite some cooling from its post-pandemic highs. The personal consumption expenditures price index (PCE) rose 3.7% year-over-year, matching June's rate and staying above the Fed's target of 2%. This comes as President Donald Trump threatens new tariffs on Canada and China, pushing up prices for goods such as computers and semiconductors.

The PCE index has been pushed higher by the way it calculates financial advice costs and software prices. However, the Commerce Department plans to adjust these measurements starting next month, which could lower measured inflation by 0.2 percentage points or more.