Inflation remained at 2.6% for the year ending in July, the Bureau of Labor Statistics reported Friday in an update to the Federal Reserve’s preferred gauge.
Economists had expected inflation in the the personal consumption expenditures index to remain at 2.6%. The fact that inflation didn’t creep even higher shows that the Fed has made progress on bringing down prices, but also indicates that price pressures still have not abated.
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The Fed’s goal is 2% annual inflation.
On a month-to-month basis, inflation was running at 0.2%.
Core inflation, which strips out volatile food and energy prices, was 2.9% on an annual basis. Core inflation was 0.3% on a monthly basis.
The PCE inflation readings lag the more closely watched consumer price index reports. The latest CPI report showed that inflation held steady at 2.7%.
The Fed has been a major focus over the past several weeks. Trump and his allies have been vociferously pushing for the Fed to start trimming interest rates. Fed Chairman Jerome Powell’s term is up next year and Trump is expected to decide on a nomination for a replacement soon.
Most investors think the first rate cut of 2025 is likely at the Fed’s next meeting in September. Bolstering those expectations, the labor market has slowed a bit in recent months.
The July jobs report revealed that some 258,000 fewer jobs were added in May and June than previously reported. And while a jobs report can be a one-off aberration, the three-month moving average of job gains was just 35,000 in July, below the level needed to keep pace with population growth.
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Still, there is underlying strength in the economy.
Gross domestic product growth for the second quarter is estimated to have been a robust 3.3%. The second-quarter report is a big change from the first quarter of this year, when GDP fell 0.5%.