Overview

• July PCE showed headline inflation at 2.6% year over year with core at 2.9%, while monthly gains were 0.2% for headline and 0.3% for core.
• Consumer spending rose 0.5% in July and personal income increased 0.4%, signaling resilient demand despite higher borrowing costs.
• Officials note tariff effects are visible in prices, with services driving the latest core increase and limited pass-through so far to broad goods inflation.
• Fed Chair Jerome Powell has signaled openness to easing, and markets now price a high probability of a 25-basis-point cut as the Sept. 5 jobs report becomes the key input.
• Fed Governor Lisa Cook has sued to block President Trump’s attempt to remove her, introducing a governance complication ahead of the Sept. 16–17 policy meeting.