US Core PCE inflation holds at 3.3% YoY in July, Q2 GDP confirmed at 1.5% annualized growth, and personal spending beat expectations.
Macro & Markets ·
The Personal Consumption Expenditures price index, the Federal Reserve's preferred inflation gauge, reached 3.7% year-over-year in July, exceeding prior forecasts of 3.6%. Core PCE inflation, which excludes volatile food and energy components, held at 3.3%, marking the second-highest reading since October 2024. Both readings underscore that US inflation remains substantially elevated relative to the Fed's 2.0% target.
Month-over-month, the PCE index advanced 0.2%, surpassing the 0.1% increase economists had anticipated. This combination of higher-than-expected monthly and annual growth signals that disinflationary momentum has stalled, complicating the central bank's policy trajectory heading into the final months of 2024.
The persistence of inflation above target levels leaves open questions about whether the Fed will sustain its current interest-rate stance or adjust its approach. Market participants are reassessing expectations for further rate cuts, as the data suggests price pressures remain more resilient than some had assumed.