The Personal Consumption Expenditures price index, the Federal Reserve's preferred measure of inflation, came in at 3.7% for July, above what forecasters had expected. The core rate, which strips out food and energy prices, remained elevated. Both readings sit well above the Fed's stated 2% target, keeping pressure on policymakers to hold interest rates high or push them higher still.
Higher-than-expected inflation reduces the probability that the Fed cuts rates anytime soon, which is bad for stocks, bonds, and rate-sensitive sectors like real estate and utilities. Portfolios heavy in long-duration bonds or growth stocks that depend on cheap borrowing costs face the most direct pressure. Cash and short-term Treasuries become relatively more attractive when rate cuts get pushed further into the future.
September 20: Federal Reserve rate decision and updated economic projections. September 13: August CPI inflation report. October 27: September PCE inflation data release.
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