Fed's Core PCE Hits 3.3% in July
The Federal Reserve’s preferred inflation gauge shows core personal consumption expenditures rose 3.3% annually in July, matching forecasts. The report also highlights modest gains in personal income and spending, while goods prices fell and services prices edged up.
The Federal Reserve’s main inflation gauge, the personal consumption expenditures price index, rose 0.2% in July, putting the annual rate at 3.7%. Both figures were 0.1 percentage point above the Dow Jones consensus.
Core PCE, which strips out volatile food and energy costs, also increased 0.2% for the month and 3.3% annually, matching expectations. The Fed views core inflation as a better indicator of longer-term trends.
Personal income grew 0.4% and personal spending rose 0.2%, both stronger than analysts had predicted.
Goods prices fell 0.1% in July, driven by a 2.7% drop in gasoline and other energy-related goods and a 0.9% decline in furnishings and long-lasting household equipment. Services prices, by contrast, increased 0.3%, led by a 1.2% rise in financial services and insurance and a 0.3% gain in housing.
After the release, stock-market futures pulled back slightly while Treasury yields edged higher. The report comes as Fed officials weigh their next policy move, with inflation still well above the central bank’s 2% target.
The Federal Open Market Committee will not meet formally in August, giving officials a brief respite before the next gathering on September 15-16. Markets price in only about a 1 in 3 probability of a rate change then, with the best chance for a hike in December.
Fed officials are meeting at the annual Jackson Hole symposium in Wyoming, where Chairman Kevin Warsh will deliver a policy speech on Friday. Since taking office in May, Warsh has been cautious about outlining policy direction, preferring markets to set the tone.
Government bond yields have risen, with the 10- and 30-year Treasurys reaching levels last seen in 2007. The surge reflects concerns about the Fed’s commitment to its inflation target and federal debt and deficit issues.
Treasury Secretary Scott Bessent announced a new initiative to increase the department’s buybacks of government debt. Market participants, however, question whether the move will meaningfully affect yields.
Core vs. Total PCE
| Measure | Monthly % | Annual % |
|---|---|---|
| Total PCE | 0.2% | 3.7% |
| Core PCE | 0.2% | 3.3% |
Goods and Services Price Movements
| Category | Monthly % | Key Drivers |
|---|---|---|
| Goods | -0.1% | 2.7% drop in gasoline and energy, 0.9% decline in furnishings |
| Services | 0.3% | 1.2% rise in financial services and insurance, 0.3% gain in housing |
The data are reported by the Commerce Department and cited by CNBC. For further analysis, see our stats page and the latest fixtures for market outlooks.
