U.S. Inflation to Rise as Powell Shifts on Job Market

A key U.S. inflation gauge likely ticked higher last month, underscoring the challenge Federal Reserve Chair Jerome Powell and his colleagues face in balancing persistent price pressures with risks to a fragile labor market, Bloomberg News’ Vince Golle reported.

Investors will watch remarks from Fed officials in the coming week to gauge their appetite for a September rate cut. (Photo: Daniel Torok, The White House Flickr)

Friday’s report is expected to show that the personal consumption expenditures (PCE) price index excluding food and energy — the Fed’s preferred measure of underlying inflation — rose 2.9% in July from a year earlier, the fastest annual pace in five months.

On a monthly basis, the core measure is projected to climb 0.3% for the second consecutive month.

Speaking Friday at the Fed’s annual symposium in Jackson Hole, Wyoming, Powell said there is now a greater risk the job market could weaken, even as concerns about inflation remain.

He added that the effects of higher tariffs on consumer prices are “now clearly visible,” though the impact may prove short-lived.

Investors will watch remarks from Fed officials in the coming week to gauge their appetite for a September rate cut. Bloomberg Economics noted: “We expect the hottest reading since February.

And if economic activity is gaining steam, firms may be able to pass through more tariff costs to consumers. That raises the risk that the upcoming CPI and jobs reports for August may not necessarily support a rate cut in September.”