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July inflation holds steady above 2% target as growth signals brighten
Annual PCE inflation was 3.7% through July, and economists pointed to data suggesting third-quarter real GDP growth could run at least 3% versus 1.5% in the second quarter.
Annual U.S. inflation stayed elevated in July, remaining well above the Federal Reserve's 2% target for the 65th straight month, according to Reuters citing government data. The pause in the decline from a recent war related peak is expected to intensify the Fed debate over whether to lift rates further or keep them steady.
The data also showed consumer spending decelerating modestly last month, while personal incomes rose faster than inflation, a mix economists said could point to consumption picking up later in the year. At the same time, orders for major capital goods rebounded, led by transportation equipment, and durable goods shipments outside defense and aerospace were described as supporting brisk business investment in artificial intelligence.
Separately, the personal consumption expenditures price index increased 3.7% in the 12 months through July, unchanged from June, the Commerce Department's Bureau of Economic Analysis said. The month over month figure rose 0.2% in July after a 0.1% fall in June, the weakest reading since April 2020.
Reuters also noted that Fed Chairman Kevin Warsh is scheduled to deliver his debut keynote at the Kansas City Fed's annual symposium in Jackson Hole, a closely watched event for inflation expectations. Economists said the July spending and core durable goods signals point to third quarter real GDP growth of at least 3%, versus an unrevised annualized growth rate of 1.5% in the second quarter.