Federal Reserve Reports Inflation Holds at 2.5%

The Federal Reserve's preferred measure of inflation, the Personal Consumption Expenditures (PCE) price index, rose by 0.2% in July, maintaining an annual increase of 2.5%, in line with expectations. Core PCE, which excludes food and energy prices, also increased by 0.2% for the month and 2.6% annually. This data is crucial as the Fed prepares for its first interest rate cut in over four years, with strong market anticipation for a reduction in the upcoming Federal Open Market Committee meeting. Despite the mild rise in inflation, consumer spending remained solid, indicating controlled price pressures. The stock market reacted positively, with futures trading higher, driven by optimism around the potential rate cuts. Analysts suggest the modest uptick in inflation is influenced by base effects from previous data showing faster disinflation.