US Inflation Remains Stubbornly High Amid Trade Fights and Conflict

US inflation remained high in July, rising 3.7% compared to a year ago, according to the Commerce Department's personal consumption expenditures price index (PCE). This is the same rate as June and is noticeably above the Federal Reserve's target of 2%. The PCE index has been pushed higher by the way it calculates the cost of financial advice and software prices.

The Iran conflict and ongoing US trade fights have contributed to high gas prices, which are likely to push up inflation in August. Even as inflation has cooled from its post-pandemic highs, consumer sentiment surveys show that most Americans are still gloomy about the economy and their finances. Inflation-adjusted incomes have risen just 0.2% compared with a year ago.

The Federal Reserve is likely to keep interest rates steady for now, but some officials support raising rates to slow borrowing and spending. New Fed Chair Kevin Warsh will deliver a high-profile speech on Friday that will be closely watched by Wall Street for any signs of his thinking about next steps.