TLDR
- July PCE inflation came in at 3.7% year over year, hotter than the expected 3.6%
- Core PCE held at 3.3% year over year, in line with June
- Month-over-month headline PCE rose 0.2%, above the expected 0.1%
- Fed officials are divided on whether to raise rates ahead of the Jackson Hole symposium
- Fed Chair Kevin Warsh will speak Friday, with analysts expecting no hints on September rate plans
The Bureau of Economic Analysis released its July personal consumption expenditures price index on Wednesday. Headline PCE came in at 3.7% year over year, matching June’s pace but above the 3.6% economists had forecast.
BREAKING: US July PCE inflation, the Fed's preferred inflation metric, hits 3.7%, above expectations of 3.6%.
Core PCE inflation was 3.3%, the second highest reading since October 2024.
US inflation continues to run at nearly double the Fed's 2.0% target.
Own assets or be left…
— The Kobeissi Letter (@KobeissiLetter) August 26, 2026
On a month-over-month basis, headline PCE rose 0.2%. That was stronger than the 0.1% rise expected and a sharp reversal from June’s 0.1% decline.
Core PCE, which strips out food and energy prices, held at 3.3% year over year. Month over month, core prices rose 0.2%, up slightly from 0.1% in June but in line with forecasts.
The second estimate of second-quarter GDP was also released Wednesday, holding steady at 1.5% growth, unchanged from the preliminary reading.
New York Fed President John Williams has previously said that a monthly PCE reading of 0.2% or below would suggest inflation is moving back toward the Fed’s 2% target without further rate hikes. Wednesday’s data just cleared that bar, but only barely.
Fed Divided Heading Into Jackson Hole
The data lands as Federal Reserve policymakers gather in Jackson Hole, Wyoming for their annual economic symposium. The timing adds pressure to an already divided central bank.
Boston Fed President Susan Collins said Tuesday she was comfortable holding rates steady at the last meeting. But she added that more evidence of falling inflation would be needed to justify holding again.
Collins said that without that evidence, it would be appropriate to raise rates “soon” to bring inflation back to target in a reasonable timeframe.
Fed Chair Kevin Warsh, who recently took over as head of the central bank, is scheduled to deliver his first major speech on Friday. Analysts expect him to avoid signaling what the Fed will do at its September meeting.
Two external forces are adding to the uncertainty. Energy prices remain elevated, tied to ongoing conflict in the Middle East. Collins said she is closely watching that situation.
President Trump has also renewed trade tensions with Canada, with both sides preparing to impose fresh tariffs in September. Those tariffs could push prices higher, complicating the Fed’s path.
The combination of sticky inflation, geopolitical risk, and new trade pressures gives hawks within the Fed fresh ammunition to push for another rate hike.
Doves, meanwhile, can point to the monthly PCE figure as reason enough to pause.
The September meeting will be the next key decision point. Markets will be watching Warsh’s Friday speech closely for any tone shift, even if no direct policy hints are expected.
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