US Inflation Remains Elevated Despite Recent Cooling

Despite recent cooling from post-pandemic highs, inflation remains a major issue in the US economy. The personal consumption expenditures price index (PCE) rose 3.7% in July compared to last year, matching June's figure and staying above the Federal Reserve's target of 2%. This marks the third straight month that inflation has remained elevated since the Iran conflict began in late February.

The PCE index measures prices for goods and services excluding food and energy costs. Core inflation, which excludes these volatile categories, also remained unchanged at 3.3% in July. Some economists have noted that the PCE index may be influenced by the way it calculates financial advice costs and software prices.

The Commerce Department has announced plans to adjust its measurements of certain services starting next month, which could lower measured inflation by 0.2 percentage point or more. This change is expected to reduce the annual PCE inflation rate.