Fed’s Preferred Inflation Rises to 2.9% in July

Data reveals inflation pressures amid tariffs, with expectations of a rate cut in September.

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Inflation
China

Inflation

Fed’s preferred inflation rises to 2.9% in July amid tariff pressures

Official data released Friday showed that the core Personal Consumption Expenditures (PCE) price index—the Federal Reserve’s preferred inflation gauge—rose by 0.3% in July compared with the previous month, and by 2.9% year-on-year, reaching its highest level since February. This was in line with market expectations. By comparison, June’s annual rate stood at 2.8%.

The headline PCE index climbed 2.6% year-on-year, unchanged from June, while increasing by 0.2% month-on-month.

Estimates also showed that personal income rose by 0.4% on a monthly basis in July, the same pace as the increase in disposable income. Meanwhile, the personal savings rate remained steady at 4.4% of disposable income.

Despite the rise in core inflation to 2.9%, analysts believe this increase is not sufficient to deter the Federal Reserve from cutting rates in its upcoming September meeting.

China

China’s manufacturing sector contracts for the fifth straight month in August

Official data released Sunday showed continued contraction in China’s manufacturing activity during August, amid weak domestic demand and growing uncertainty over trade negotiations with the United States.

The official Purchasing Managers’ Index (PMI) rose slightly to 49.4 in August from 49.3 in July, but remained below the 50-point threshold that separates expansion from contraction, and fell short of the 49.5 consensus forecast in a Reuters poll.

China’s economy continues to face mounting pressures from weak exports due to U.S. tariffs, a sluggish property market, rising labor market concerns, high local government debt, and extreme weather conditions—factors that could hinder the country’s ability to meet its 2025 growth target of around 5%.

On the other hand, the non-manufacturing PMI—which covers services and construction—rose to 50.3 in August from 50.1 in July, while the composite index from the National Bureau of Statistics edged up to 50.5 from 50.2 in the previous month.

Fed’s Preferred Inflation Rises to 2.9% in July

Fed’s Preferred Inflation Rises to 2.9% in July

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