\n<\/p>\n
Inflation edged higher in July, according to the Federal Reserve’s preferred inflation measure, indicating that President Donald Trump’s tariffs are working their way through the U.S. economy.<\/p>\n
The personal consumption expenditures price index<\/a> showed that core inflation, which excludes food and energy costs, ran at a 2.9% seasonally adjusted annual rate, according to a Commerce Department report Friday. That was up 0.1 percentage point from the June level but in line with the Dow Jones consensus forecast.<\/p>\n On a monthly basis, the core PCE index increased 0.3%, also in line with expectations. The all-items index showed the annual rate at 2.6% and the monthly gain at 0.2%, also hitting the consensus outlook.<\/p>\n The Fed uses the PCE price index as its primary forecasting tool. Though it watches both numbers, policymakers consider core inflation to be a better indicator of longer-term trends as it excludes the volatile gas and groceries figures.<\/p>\n Central bankers target inflation at 2%, so Friday’s report shows the economy still a distance from where the Fed feels comfortable.<\/p>\n Nevertheless, markets expect the Fed to resume lowering its benchmark interest rate when policymakers convene next month. Fed Governor Christopher Waller reiterated his support for a cut in a speech Thursday, saying he would entertain a larger move if labor market data continue weakening.<\/p>\n “The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Today’s in-line PCE Price Index will keep the focus on the jobs market. For now, the odds still favor a September cut.”<\/p>\n Along with the inflation moves, consumer spending increased 0.5% on the month, in line with forecasts and indicative of strength despite the higher prices. Personal income accelerated 0.4%, rounding out a report that saw all figures hit the consensus outlook.<\/p>\n