July core PCE inflation rises 3.3% year-over-year, matching forecasts

The personal consumption expenditures (PCE) price index, the Federal Reserve's primary inflation measure, rose 0.2% in July on a seasonally adjusted basis, taking the annual rate to 3.7%, according to the Commerce Department. Core PCE, which excludes food and energy, increased 0.2% for the month and 3.3% over the year, in line with economists' forecasts.

Personal income grew 0.4% and consumer spending rose 0.2% in July, both surpassing expectations. Prices for goods fell 0.1% as gasoline and other energy items dropped 2.7% and furnishings declined 0.9%. Service prices climbed 0.3%, driven by a 1.2% rise in financial services and insurance and a 0.3% increase in housing costs.

"The Fed generally views core inflation as the better indicator of longer-term price trends," officials have said.

The data arrived as Federal Reserve officials consider their next policy step. The Federal Open Market Committee will reconvene on Sept. 15-16, with markets assigning roughly a one-in-three chance of a rate change at that meeting and a higher probability of a hike in December.

While the committee is not meeting in August, policymakers will attend the annual Jackson Hole symposium, where Chairman Kevin Warsh is slated to deliver a policy speech on Friday. Treasury yields have risen, with 10- and 30-year notes reaching their highest levels since 2007, reflecting concerns about inflation targets and fiscal deficits. Treasury Secretary Scott Bessent recently announced an expanded buyback program for government debt, though its impact on yields remains uncertain.