US Inflation Remains Elevated Despite July's Steady Reading

The personal consumption expenditures price index (PCE), a key measure of inflation closely watched by the Federal Reserve, remained elevated in July at 3.7%, unchanged from June and above its target of 2%. This is the latest sign that many Americans are still struggling with higher costs, particularly as gas prices remain high due to the ongoing Iran conflict and US trade tensions.

The inflation rate has worsened since the US and Israel attacked Iran in late February, when it stood at 2.9%, and is now noticeably above the Fed's target of 2%. The PCE index puts less weight on rental costs, which have been cooling steadily in recent months, contributing to its higher reading compared to the consumer price index (CPI).

Core inflation, excluding food and energy categories, was also unchanged at 3.3% in July. Some Fed officials have said that core inflation running at about 0.2% a month would be a reassuring sign that inflation is heading back to the 2% target.

The Commerce Department has announced plans to adjust its measurements of financial advice and software prices, which will likely reduce annual PCE inflation by 0.2 percentage point or so. This change may bring measured inflation in line with actual consumer spending patterns.