US PCE inflation holds at 3.7% in July

The US personal consumption expenditures price index rose 3.7% in July from a year earlier, the Commerce Department said Wednesday, leaving the Federal Reserve's preferred inflation gauge unchanged from June.

The PCE index rose 0.2% from the previous month. The annual rate remained above the Fed's long-term 2% inflation target and close to three-year highs.

Energy goods and services prices rose 15.3% from a year earlier, down from a May peak of 24.1%. Gasoline prices were up 37.5% since the start of the Iran war, while diesel prices were up 50% over the same period.

Consumer spending increased 0.2% in July, with most gains in services including health care, housing, financial services and insurance. Spending on major goods categories declined.

In a separate release, the Commerce Department said annualized real GDP growth for the second quarter of 2026 was 1.5% in its second estimate, unchanged from the first estimate.

Heather Long, chief economist at Navy Federal Credit Union, said the data showed the United States “still has an inflation problem” and gave the Fed time to wait. “It's not getting worse, but it didn't get any better in July either,” she said.

Kathy Bostjancic, chief economist at Nationwide, said July consumer spending and core durable goods shipments pointed to real GDP growth in the third quarter running at least 3%.

New Fed Chair Kevin Warsh has said the central bank is focused on fighting inflation, with a growing group of policymakers calling for interest rate hikes before the Fed's next meeting in September.