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2w ago

July PCE Inflation Tops Forecast and Deepens Fed Divide

Raising the odds of tighter policy at the September Fed meeting, the hotter-than-expected print puts Chair Kevin Warsh’s Jackson Hole remarks under close market scrutiny.

FILE PHOTO: A trader works, as screens broadcast a news conference by U.S. Federal Reserve Chair Kevin Warsh following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 29, 2026. REUTERS/Brendan McDermid/File Photo/File Photo
A woman shops for fruit in a store in New York City, U.S., February 12, 2025. REUTERS/Brendan McDermid
FILE - A person loads groceries in plastic bags into their vehicle, May 18, 2026, at a grocery store in Cincinnati. (AP Photo/Joshua A. Bickel, File)
A shopper carries a basket of products at a grocery store in Wilmington, North Carolina, on August 8, 2026.

Overview

  • The Bureau of Economic Analysis reported on Wednesday that headline PCE rose 0.2% for July and 3.7% year-over-year while core PCE rose 0.2% month-over-month and 3.3% year-over-year.
  • July’s 0.2% monthly gain reversed June’s 0.1% decline and showed inflation holding steady rather than continuing the recent dip that some officials had cited.
  • Personal income rose 0.4% and consumer spending increased 0.2% in July, signaling continued household demand that keeps upward pressure on prices.
  • Markets reacted with mixed signals as fed funds futures put roughly a 38–40% chance on a September rate hike and Treasury yields ticked higher on the data surprise.
  • The report sharpened a split at the Federal Reserve between officials who argue for more tightening and those content to hold, and it raises the stakes for Warsh’s Jackson Hole speech and September policy decisions.