July PCE inflation holds steady at 3.7%, bolstering bets on Fed rate hike by year end

**Washington** — US inflation remained stubbornly elevated in July, leaving the Federal Reserve in a familiar bind: no improvement, but no sharp deterioration either.

The Personal Consumption Expenditures (PCE) price index rose 3.7% in the 12 months through July, the Bureau of Economic Analysis reported Wednesday, matching June’s pace and coming in 0.1 percentage point above the consensus forecast of economists polled by Reuters, according to Al Jazeera. On a monthly basis, overall prices rose 0.2%, reversing June’s 0.1% decline, which had been the weakest reading since April 2020.

Core PCE, which strips out volatile food and energy categories, also held steady at 3.3% year-over-year and rose 0.2% month-over-month, in line with estimates.

“This is data that supports a hike,” Omair Sharif, founder and president of Inflation Insights, told Al Jazeera.

Wall Street’s major indexes edged lower on the news. The Dow Jones Industrial Average fell 113.52 points, or 0.21%, to 53,463.88; the S&P 500 lost 1.58 points, or 0.02%, to 7,675.70; and the Nasdaq Composite slipped 21.10 points, or 0.08%, to 26,130.20, according to a Reuters report published by The Detroit News.

The dollar rose by the most in nearly four weeks, recouping about half the losses triggered last week by Treasury Secretary Scott Bessent’s surprise move to prop up the bond market, Bloomberg reported.

**Rate hike probabilities jump**

Betting on a rate increase at the Fed’s September 15-16 meeting rose to about 42% after the report, up from roughly 36% immediately before the data, Al Jazeera reported, citing CME Group’s Fed fund futures. A separate reading from the CME FedWatch tool put the odds at 38.1%, according to The Detroit News.

The Fed is divided. Three members of the rate-setting Federal Open Market Committee dissented in favor of a hike at the last meeting, according to Nasdaq. Chair Kevin Warsh is scheduled to deliver a speech Friday at the Fed’s annual Jackson Hole symposium in Wyoming, where he is expected to shed further light on the central bank’s thinking.

“It wasn’t enough to shift the balance for September’s meeting, but if subsequent data point in the same direction, the Fed may feel more pressure to move off the sidelines,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, told Reuters.

**Energy, tariffs and trade wars keep pressure on prices**

Inflation has been driven higher since the US and Israel attacked Iran in late February, when the annual PCE stood at 2.9%, Al Jazeera reported. Energy prices spiraled upward as the conflict disrupted global oil supplies. Gasoline prices averaged $4.10 per gallon nationally, according to the American Automobile Association.

New tariff pressures are also looming. Trade talks between the US and Canada collapsed last Friday, resulting in new levies on $20 billion of Canadian products, with additional retaliatory measures expected in coming months, Al Jazeera reported.

Consumer confidence fell in August for the second straight month, the Conference Board said Tuesday, cited by The New York Times in a report that also appeared in the Honolulu Star-Advertiser.

“It’s hard to ignore the reality of those higher prices,” Tom Porcelli, chief economist at Wells Fargo, told The New York Times. “People are feeling the pinch of it.”

Inflation-adjusted personal income rose just 0.2% from a year earlier after several months of declines, Al Jazeera reported. Personal income rose 0.4% in July and spending rose 0.2%, both above expectations, according to Nasdaq data.

“The United States still has an inflation problem. PCE inflation came in hotter than expected,” Heather Long, chief economist at the Navy Federal Credit Union, told CBS News in an email. “The impacts of the war in Iran are still apparent with $4 gas and $5.60 diesel.”

**Housing market shows signs of innovation**

Amid the inflationary backdrop, mortgage lender Better Mortgage and crypto exchange Coinbase announced the general availability of a Bitcoin-backed mortgage product for US homebuyers, Cointelegraph reported. The product pairs a Fannie Mae-backed home loan with a separate down payment loan secured by Bitcoin, requiring collateral worth at least 250% of the loan amount. The median sales price of a new US home stood at about $400,000 in 2026, according to Census Bureau data.

“There is no crisis, it is more about expectations or guidance we are going to get from the Fed and what the Treasury is trying to do,” Greg Tuorto, head of US small and midcap investing at Goldman Sachs Asset Management, told Reuters. “But on the other side, on the positive side, the underlying economic environment is really good.”

Economic growth in the second quarter was revised to 1.5%, The Detroit News reported.

Investors now await Warsh’s Jackson Hole address and the next consumer price data due before the September FOMC meeting.