The Federal Reserve’s preferred gauge of inflation, a price index of what Americans pay for goods and services, remained steady for the year ending in July, the government said Wednesday.
The Personal Consumption Expenditures Price Index increased 0.2% for the month or 3.7% on an annual basis, matching the yearly reading in June, according to the Bureau of Economic Analysis.
The PCE index is a primary tool for the Fed’s decision-makers and could factor into whether they raise interest rates to control inflation at their meeting in September.
Core inflation, which excludes volatile food and energy prices, stood at 3.3% for the year.
Republicans clinging to congressional majorities said the report showed progress in taming rampant Biden-era inflation and set the stage for gains as their tax-cutting policies take hold.
“Today’s data holds some promise for working Americans,” said House Ways and Means Committee Chairman Jason Smith, Missouri Republican. “Core inflation continues holding in a tight range, and it’s evident that businesses are responding to the certainty Republicans fought for and delivered with the Working Families Tax Cuts.”
He pointed to provisions in the legislation that allowed companies to fully expense factories and new equipment, plus tax cuts on overtime for workers who will fill those factories.
Democrats took a starkly different view, saying prices continue to rise relative to last year despite the Trump administration’s promise to cut costs. They said President Trump’s tariff policies and war with Iran made things worse.
“Donald Trump and [Vice President] J.D. Vance’s economy is in freefall as their deadly and costly war with Iran and reckless tariffs continue to drive prices through the roof,” Democratic National Committee spokeswoman Kendall Witmer said. “Working families are breaking the bank to afford gas, groceries, and medicine, as Trump and Vance turn a blind eye and prioritize their own self-interests.”
Mr. Trump says Democrats created an affordability crisis through government spending during the Biden years, and that he’s made progress in reducing the price of eggs and other products.
Still, polling suggests Americans are struggling with high costs, particularly the rising price of gas from the Iran war, and central bankers are seriously considering rate hikes to tame the problem.
CME Fedwatch, a key forecaster, says there is a 40% probability that Fed bankers will vote to raise interest rates in September, despite Mr. Trump’s push to slash rates under new Fed Chairman Kevin Warsh.
Mr. Warsh is scheduled to address a major economic gathering at Jackson Hole, Wyoming, on Friday, which could shed light on his approach.
