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The Fed’s Preferred Inflation Gauge Sees Uptick in July, Indicating Potential Economic Shift

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The Federal Reserve Warns of Bumpy Inflation Process

Rapid Inflation Continues

  • The Personal Consumption Expenditures index climbed 3.3 percent in the year through July
  • This is up from 3 percent in the previous reading
  • While down from a peak of 7 percent last summer, it is still above the Fed’s target of 2 percent growth

Core Inflation on the Rise

  • Central bankers closely monitor core inflation, which excludes volatile food and fuel prices
  • The measure climbed to 4.2 percent in July, up from 4.1 percent the previous month

Temporary Bump in the Road

Inflation is expected to slow later this year and into 2024

Thursday’s report marks a bump in the road, not a reversal of progress

Fed officials remain cautious and hesitant to declare victory

Economy Retains Momentum

Despite increased interest rates, the job market remains strong and consumers continue to shop

Unemployment rate expected to remain low at 3.5 percent

Personal spending climbed by 0.8 percent in July, exceeding economists’ expectations

Focus on P.C.E. Inflation

P.C.E. inflation is the measure used by the Fed to define its official inflation goal

Data over the next few weeks will be closely watched by Fed officials

Interest Rate Decision

Fed officials will consider interest rates at their meeting on Sept. 20

Meeting is considered “live,” but officials may choose to be patient in making a move

Jerome H. Powell, the Fed chair, emphasizes the need to assess incoming data and evolving outlook

Anticipated Rate Increase

Investors anticipate a final rate increase, possibly at the central bank’s November gathering

Economic projections will be released, showing expectations for rate increases and inflation slowdown

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