Core U.S. inflation held at 3.3% year-over-year in July, matching June and marking a 65th straight month above the Federal Reserve's 2% target. Stronger revisions to consumer spending and business investment brightened the outlook for third-quarter growth, sharpening the debate over a September rate move.
The Bureau of Economic Analysis reported the Personal Consumption Expenditures price index rose 3.7% in the 12 months through July, unchanged from June and above the 3.6% economists had forecast. Core PCE, which excludes food and energy, held steady at 3.3% on the year while its monthly pace rose to 0.2% from 0.1% in June. Inflation has now run above the Fed's 2% target for 65 straight months.
Fed faces a widening rate divide
Fed funds futures priced about a 40% probability of a rate hike at the September 15-16 meeting, up from roughly 36% before the report. According to Reuters, economist Omair Sharif said: "This is data that supports a hike". Crypto Briefing separately reported markets pricing a 42% probability of a September hike, reflecting the same hawkish tilt.
Growth outlook brightens too
The BEA left its second-quarter GDP growth estimate unchanged at an annualized 1.5% but revised consumer spending growth up to 3.4% from an initial 3.2%. Nationwide's chief economist, Kathy Bostjancic, said the July spending and durable-goods data point to a third-quarter growth rate of at least 3%, double the second quarter's pace. Crypto Briefing cited separate forecasts putting Q3 growth at around 2.5% annualized, pointing to consumer demand, private investment and AI-related capital spending as drivers.
Tariffs and a softer CPI add complexity
Corporate profits jumped $400.9 billion in the second quarter, the second-largest quarterly increase on record, which Reuters said was likely driven by Trump's corporate tax overhaul. New trade friction is also stirring costs: talks between the U.S. and Canada collapsed on Friday. The breakdown triggered new levies on $20 billion of Canadian imports. Separately, the Consumer Price Index — a related but distinct gauge — eased to 3.4% year-over-year in July from 3.5% in June, Crypto Briefing reported, offering a partial counterpoint to the PCE reading.
Sources: Reuters, Crypto Briefing
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