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Prices consumers pay for a variety of goods and services rose slightly in July, according to the Federal Reserve’s main inflation gauge.<\/p>\n
The personal consumption expenditures price index,<\/a> which the Fed uses as its preferred forecasting tool, increased a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 3.7%, the Commerce Department reported Wednesday. Both were 0.1 percentage point above the Dow Jones consensus.<\/p>\n But stripping out volatile food and energy costs, core PCE posted respective gains of 0.2% and 3.3%, in line with forecasts. While the Fed considers both measures, policymakers generally see core inflation as the better measure of longer-term trends.<\/p>\n The report also showed that personal income rose 0.4% while spending increased 0.2%, both stronger than expected.<\/p>\n Goods prices actually declined on the month, off 0.1%, driven by a 2.7% decrease in gasoline and other energy-related goods and a 0.9% drop in furnishings and long-lasting household equipment.<\/p>\n Services prices rose 0.3%, pushed by a 1.2% increase in financial services and insurance as well as a 0.3% gain in housing.<\/p>\n Stock market futures<\/a> pulled back a bit after the report while Treasury yields were higher.<\/p>\n The report comes with Fed officials weighing their next policy move as inflation, despite generally soft monthly readings this summer, is still well above the central bank’s 2% goal.<\/p>\n With the rate-setting Federal Open Market Committee not meeting formally in August, officials have a bit of a respite before making a decision at their next gathering on Sept. 15-16. Markets are pricing in only about a 1 in 3 probability of a move then, with the best chance for a rate hike coming in December.<\/p>\n Though the FOMC doesn’t meet, Fed officials this week gather at Jackson Hole, Wyoming, for their annual symposium, the highlight being a policy speech scheduled for Friday from Chairman Kevin Warsh<\/a>.<\/p>\n Since taking office in May, Warsh has been circumspect about where he sees policy heading, instead preferring that markets set the tone.<\/p>\n Government bond yields have been on the rise lately. Both the 10- and 30-year Treasurys recently saw yields hit their highest levels since 2007, just before the global financial crisis. The surge has come from a variety of factors, including investors’ concern about the Fed’s commitment to its inflation target as well as debt and deficit issues with the federal budget.<\/p>\n Treasury Secretary Scott Bessent a week ago announced an initiative in which his department would step up its buybacks of government debt. However, market participants have expressed doubt about whether the move will have a meaningful impact on yields.<\/p>\n