This morning, the Fed’s preferred inflation measure for July met expectations as price pressures continue to cool. Both headline personal consumption expenditures (PCE) and core PCE increased +0.2% in July, equaling the median forecast. On a year-over-year basis through July, overall PCE was rising at a +2.5% pace, while the annual core rate was up +2.6%. No real surprises here.

In other news today, July personal income rose +0.3%, slightly stronger than the prior month, while personal spending climbed +0.5%, up from +0.3% in June. This indicates consumers started the new quarter on a positive note.

Inflation is low enough to begin easing; the bigger question is how aggressive can the Fed afford to be when the economy remains on solid ground?

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