The Fed’s Favorite Inflation Measure Comes Better Than Expected in July: What You Need to Know

The core personal consumption expenditure price index for July, which excludes volatile food and energy prices, rose to $23.7 billion or 0.1% month-over-month in July, the Bureau of Economic Analysis said Friday. Economists had expected an increase of 0.3%.

The figure is the Federal Reserve’s preferred inflation measure – a subject of the Fed Chairman Jerome Powell addressed Friday morning to the Jackson Hole Economic Symposium.

Also read: Stocks fall as Powell doubles down on Fed’s inflation fight until ‘the job is done’

Soft landing expectations: Former Chief Economist of PIMCO, Paul McCulley said on CNBC’s “Squawk on the Street” that he expects interest rates to settle in the 3.5% to 4% range over the next six months of the year, because the Fed will have to maintain a restrictive policy to achieve price stability.

McCulley said he thinks a soft landing is still achievable, but the Fed will keep rates higher for longer.

Atlanta Fed President Raphael Bostic said in an interview with CNBC Steve Liesman that if the Fed’s inflation target reaches 3.25% to 3.5% and the economy begins to slow, then it would tilt towards holding rates so that the economy can absorb rate hikes and achieve a neutral inflation rate of 2%.

The last word: Heading into Friday, many Fed officials, including Powell, flagged the personal consumption expenditure price index as a leading indicator of interest rate hikes for the September meeting.

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