Fed’s Preferred Inflation Gauge Shows Core Prices Rose 3.3% in July Ahead of Jackson Hole Speech

WASHINGTON — Consumer prices ticked higher in July, with the Federal Reserve’s preferred inflation gauge showing annual core inflation holding at 3.3%, according to a Commerce Department report released Wednesday, arriving just days before Fed Chairman Kevin Warsh delivers his first major policy speech at the central bank’s annual Jackson Hole symposium.

The personal consumption expenditures price index, the measure the Fed relies on most heavily for its policy forecasting, rose a seasonally adjusted 0.2% for the month, putting the annual headline inflation rate at 3.7%. Both figures came in 0.1 percentage point above the Dow Jones consensus estimate. Stripping out volatile food and energy costs, core PCE posted respective monthly and annual gains of 0.2% and 3.3%, landing exactly in line with economist forecasts. While the Fed monitors both the headline and core measures, policymakers generally treat core inflation as the more reliable indicator of longer-term underlying price trends, given how much short-term volatility in food and energy prices can distort the headline figure.

The broader report also showed personal income rising 0.4% in July, while consumer spending increased 0.2%, with both figures coming in stronger than economists had anticipated, according to CNBC’s coverage of the release.

A closer breakdown of the data revealed diverging trends across different categories of consumer spending. Goods prices actually declined during the month, falling 0.1%, driven primarily by a 2.7% decrease in gasoline and other energy-related goods, alongside a 0.9% drop in furnishings and long-lasting household equipment. Services prices, by contrast, continued climbing, rising 0.3% for the month, pushed higher by a 1.2% increase in financial services and insurance costs along with a more modest 0.3% gain in housing costs.

Financial markets showed a modest, immediate reaction to the data. Stock market futures pulled back slightly following the report’s release, while Treasury yields moved higher, reflecting investor recalibration around the persistence of inflation heading into the Fed’s next major policy decisions.

The report lands at a pivotal moment for Federal Reserve policymakers, who continue weighing their next move even as inflation, despite generally soft monthly readings throughout the summer, remains well above the central bank’s longstanding 2% target. The rate-setting Federal Open Market Committee did not hold a formal policy meeting in August, giving officials a brief reprieve before their next scheduled gathering on Sept. 15-16. According to CNBC, markets are currently pricing in only about a 1-in-3 probability of a rate move at that September meeting, with traders instead viewing December as the more likely window for any potential rate hike.

Although the FOMC itself is not meeting this week, Fed officials are gathering in Jackson Hole, Wyoming, for the central bank’s closely watched annual economic policy symposium, with the event’s centerpiece being a keynote policy address scheduled for Friday from Chairman Kevin Warsh. Since taking office in May, Warsh has remained notably circumspect regarding where he sees monetary policy heading, generally preferring to let markets set their own expectations rather than offering explicit forward guidance, a communication style that has left investors particularly eager for clearer signals during his Jackson Hole appearance.

The inflation data arrives amid a broader backdrop of rising government bond yields that has added further complexity to the Fed’s policy calculus. Both the 10-year and 30-year Treasury yields recently touched their highest levels since 2007, just before the onset of the global financial crisis, according to CNBC. That surge has been attributed to a combination of factors, including growing investor concern about the Fed’s underlying commitment to its inflation target, as well as broader anxiety surrounding the federal government’s debt levels and budget deficits.

In response to those rising yields, Treasury Secretary Scott Bessent announced roughly a week earlier that his department would significantly step up its buybacks of government debt, an initiative aimed at helping stabilize longer-term borrowing costs. However, according to CNBC, market participants have expressed skepticism regarding whether that buyback program will ultimately have a meaningful, lasting impact on yields given the scale of the broader fiscal pressures driving the recent bond market volatility.

Wednesday’s report caps a busy week of market-moving developments, with investors simultaneously digesting the inflation data, Nvidia’s closely watched quarterly earnings report, and Meta’s separate announcement of a roughly $16.7 billion settlement resolving state lawsuits over allegations the company designed its platforms to addict children, developments that have collectively shaped market sentiment even as the underlying inflation picture remains the dominant macroeconomic story heading into the fall.

With core inflation holding steady at 3.3%, comfortably above the Fed’s 2% target but not accelerating further, Wednesday’s report is likely to reinforce the current wait-and-see posture many Fed officials appear to be adopting ahead of their September meeting. Investors and economists alike are expected to parse Warsh’s Friday remarks at Jackson Hole closely for any indication of how the incoming chairman intends to balance the central bank’s continued inflation-fighting mandate against growing concerns about elevated borrowing costs and the broader health of the bond market, even as his relatively guarded public communication style so far has left much of that policy direction still genuinely uncertain heading into his first major address in the role.