Fed’s preferred gauge of inflation holds steady, signaling cautious optimism
The latest U.S. Core Personal Consumption Expenditures (PCE) Price Index rose 0.3% in July 2025, in line with market forecasts and slightly higher than the previous month’s 0.2%. The data underscores a steady pace of price growth and remains central to the Federal Reserve’s policy outlook.
Inflation steady, but still monitored closely
The Core PCE index, which strips out volatile food and energy costs, is the Federal Reserve’s preferred inflation measure. The July release shows that inflationary pressures remain present but contained, suggesting that the Fed’s restrictive policy stance is gradually balancing demand and price growth.
BITX Economists note that the reading was widely anticipated. “A 0.3% increase keeps inflation elevated but not alarming,” said one senior economist. “The consistency with forecasts may help the Fed stay on its current trajectory without rushing into policy shifts.”
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Implications for monetary policy
The Fed has signaled that it is watching monthly data closely before making its next move on interest rates. With inflation not accelerating beyond expectations, investors interpret the report as a sign the central bank could consider holding rates steady in the near term.
Analysts stress that while the pace of price growth is moderating compared with the peak levels seen in previous years, it is still above the Fed’s 2% annual target. Continued progress will likely determine the timing and size of any future rate adjustments.
Financial markets reacted calmly to the release, with little movement in Treasury yields and equities. The data is seen as reaffirming expectations rather than surprising investors.
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