US inflation data shows PCE rose 0.2% in July

Inflation data for July indicates a complex economic landscape. The Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred gauge, rose 0.2% for the month and 3.7% annually, remaining unchanged from June. Core PCE, which excludes food and energy, increased 0.2% monthly and 3.3% annually.

Federal Reserve Chair Kevin Warsh noted at a Jackson Hole speech that 54% of the 199 items in the PCE index have risen more than 3% over the past 12 months. This persistent inflation suggests that early monetary easing may be difficult to justify, as the central bank maintains its 2% target.

Market reactions have been notable. Following the inflation data and recent employment reports, the probability of a September interest rate hike fell from 48.4% to 38.1% according to the CME FedWatch tracker. In the cryptocurrency market, Bitcoin prices dropped below $80,000 following the inflation-related commentary, despite significant inflows into U.S.-listed Bitcoin ETFs, led primarily by BlackRock’s iShares Bitcoin Trust.