July PCE inflation unchanged at 3.7%, exceeding forecasts and pressuring Fed policy

The Personal Consumption Expenditures price index, the Federal Reserve's preferred inflation gauge, held at a 3.7% annual pace in July, unchanged from June and hotter than the 3.6% annual increase economists polled by FactSet had predicted, CBS News reports.

Core PCE, which excludes more volatile energy and food prices, rose at an annual rate of 3.3% in July, according to CBS News, exceeding the 3.2% pace economists had forecast. Core PCE was unchanged from June, per CBS News reporting. Both measures remain well above the Federal Reserve's 2% inflation target.

PCE has eased after reaching a three-year peak in May, according to CBS News, but the stalled progress in July signals persistent price pressures. Heather Long, chief economist at Navy Federal Credit Union, said "The United States still has an inflation problem. PCE inflation came in hotter than expected," per CBS News. Long cited impacts of the Iran war, noting "$4 gas and $5.60 diesel," according to CBS News reporting. The Iran war has pushed up oil and gas prices, eating into consumers' budgets and putting pressure on household spending, CBS News reports.

Consumer spending on goods declined by $49.9 billion, while spending on services increased by $86.2 billion, per CBS News. The U.S. economy expanded at a 1.5% clip in the second quarter, a sluggish reading in line with the Commerce Department's first estimate, according to CBS News.

Fed officials have held interest rates steady so far this year, although some have signaled openness to raising rates to tame inflation, per CBS News. Fed Chair Kevin Warsh is scheduled to deliver an address in Jackson Hole, Wyoming, on Friday, according to CBS News. Bret Kenwell, eToro U.S. investment analyst, wrote that "inflation is still too high for comfort, and investors will be watching to see whether Fed Chair Kevin Warsh uses Friday's Jackson Hole speech to address how policymakers plan to bring it back toward the Fed's long-term target," per CBS News reporting.