The US Commerce Department's Bureau of Economic Analysis released July inflation data showing the Personal Consumption Expenditures (PCE) price index held steady at an annual rate of 3.7%, unchanged from June [1, 2, 3, 4, 5]. Monthly PCE inflation rose 0.2% in July after falling 0.1% in June [1, 2, 3, 4, 5]. Core PCE inflation, which excludes volatile food and energy costs, remained steady at 3.3% annually in July [6, 2, 3, 4].
The department also confirmed the US economy grew at an annualized rate of 1.5% in the second quarter of 2026, matching the initial estimate [1, 2, 3, 4]. Energy prices have contributed to inflation remaining above the Federal Reserve’s 2% target for the 65th consecutive month. This includes a year-over-year gasoline price increase of 37.5% and diesel prices up 50% since the conflict with Iran began in late February, causing supply disruptions [1, 5, 7, 8].
The Federal Reserve has held its policy interest rate steady in the 3.5% to 3.75% range since December 2025 [1, 6]. However, Fed officials remain divided on whether to hike rates soon. Boston Fed President Susan Collins said yesterday that "Should evidence of sustained inflation progress not materialise, I believe it will be appropriate to tighten policy soon to ensure we deliver price stability in a reasonable time frame" [6]. Fed Chairman Kevin Warsh noted increased calls from officials to raise rates as the central bank focuses on fighting inflation [5].
Trade tensions also escalated after US-Canada negotiations collapsed on August 21, triggering new US tariffs on $20 billion in Canadian goods and reciprocal tariffs from Canada [1, 7, 8].
The next major scheduled release will focus on August inflation data, with market watchers awaiting further signals on the Fed’s policy path amid persistent inflation and geopolitical uncertainties.
