July PCE Inflation Surges, Prompting Speculation of Fed Rate Hike

The key measure of inflation, the personal consumption expenditures (PCE) price index, increased by 3.3% in July, raising the possibility of the Federal Reserve raising interest rates again this year. Consumer spending also accelerated, which could maintain upward pressure on prices. The core PCE inflation, which excludes volatile food and energy items, climbed to 4.2%. The report shows a slightly bigger monthly pickup in inflation compared to the consumer price index (CPI). Prices of services such as healthcare and transportation advanced more dramatically. The increase in spending and a sturdy economy may lead the Fed to raise interest rates again, although consumption could slow as Americans resume student loan repayments and deplete pandemic-related savings.