Inflation Isn’t Getting Worse. It’s Not Getting Better Either.

The Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index, rose 3.7% year-over-year in July — the same pace as June, and slightly above the 3.6% forecasters had expected. Core inflation, which strips out food and gas, came in at 3.3%, in line with expectations. A temporary dip in gasoline prices wasn’t enough to pull the headline number down.

The reading matters because core PCE is the specific benchmark the Fed uses to judge progress toward its 2% target — a target it hasn’t hit since 2021. With inflation neither accelerating nor cooling in any meaningful way, the report didn’t give officials a clear signal ahead of their September meeting on whether to raise rates. Consumer behavior showed some strain regardless: spending was flat for the month after adjusting for inflation, the weakest reading since January, even though personal income rose 0.4%, double what forecasters expected.

Economists are reading the same data differently. Heather Long of Navy Federal Credit Union called it evidence the Fed still has “time to wait and see,” while Kathy Bostjancic of Nationwide said the readings should keep the Fed “in a hawkish mood and poised to raise rates” absent clearer cooling in the months ahead. Both are responding to the same report — a reminder that a single data point rarely settles the question it’s asked to answer, which is exactly why a long-term plan isn’t built around correctly guessing what happens at any one Fed meeting.