The latest Commerce Department data shows the personal consumption expenditures (PCE) price index rose 3.7% in July compared with a year earlier, unchanged from June and well above the Federal Reserve’s 2% target. The PCE gauge, which the Fed watches closely, excludes much of the rental market and therefore runs hotter than the more widely cited consumer price index.
Fed Chair signals possible rate hikes
Federal Reserve Chair Kevin Warsh told a crowd at the annual Jackson Hole conference that inflation remains too high and that the central bank may need to raise interest rates in the coming months. While recent data suggest a modest cooling, Warsh said the underlying trend has not improved enough to meet the Fed’s objective.
“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do.”
Implications for borrowers and the broader economy
Mortgage rates edged higher this week, with the 30‑year fixed rate climbing to 6.66% and the 15‑year rate rising to 5.98%. Higher borrowing costs can add hundreds of dollars to monthly mortgage payments, potentially slowing home‑buyer activity.
U.S. economic growth slowed to a 1.5% annualized pace in the second quarter, with imports surging 12.5% and trimming the GDP figure. Consumer confidence dipped to 89.4 in August, the lowest level in seven months, reflecting lingering concerns about rising gas prices and overall cost of living.
Labor market remains tight
Jobless claims fell to 203,000 last week, staying within a historically low range that signals a tight labor market and continued job security for most Americans.
Investors reacted positively to the news, with the S&P 500, Dow Jones Industrial Average, and Nasdaq all posting gains, while bond markets priced in the possibility of further Fed tightening.
Political backdrop
The persistent inflation and potential rate hikes come as the Trump administration heads into the 2026 midterm elections, less than 70 days away. Economic conditions could influence voter sentiment and the Republican Party’s prospects nationwide.
Original reporting: Alexandria, VA News – WTOP News — read the source article.
