US Inflation Remains Stubbornly High Despite Fed's Target

The US Federal Reserve's preferred inflation measure, Core PCE (Personal Consumption Expenditures index), excluding food and energy, has been above its 2% target for over five years. The latest update showed a year-on-year increase of +3.3%, unchanged from the previous month but still higher than expected.

This trend is concerning for the Fed, with three out of twelve FOMC members citing rising inflationary pressures as their reason for voting for a 25 basis point rate hike in July.

However, there are signs that the US economy may not be responding well to potential rate hikes. Recent weak Non-Farm Payroll reports and disappointing earnings updates from retailers such as Walmart suggest that lower-income households may be feeling strain, while higher earners continue to spend.