Fed's Preferred Inflation Gauge Holds Steady in July

What is the Fed's preferred inflation gauge?

The Fed's preferred inflation gauge is the core personal consumption expenditures (PCE) index, which excludes food and energy prices. Federalreserve.gov

The PCE index is a measure of the change in prices of goods and services purchased by consumers. The Fed uses the PCE index to measure inflation because it is a more comprehensive measure of inflation than the consumer price index (CPI), which includes food and energy prices.

Why did the Fed's preferred inflation gauge hold steady in July?

The Fed's preferred inflation gauge held steady in July because of a number of factors, including:

• A decrease in the price of gasoline
• A decrease in the price of used cars
• A decrease in the price of airfare

These factors offset an increase in the price of food and shelter.

What does this mean for the Fed?

The fact that the Fed's preferred inflation gauge held steady in July is a positive sign for the Fed. It means that inflation is not accelerating, which gives the Fed more room to raise interest rates gradually.

The Fed is expected to raise interest rates again at its next meeting in September. However, the pace of rate hikes is likely to be slower than it was earlier this year. This is because the Fed wants to avoid raising rates too quickly, which could lead to a recession.

What does this mean for consumers?

The fact that the Fed's preferred inflation gauge held steady in July is also a positive sign for consumers. It means that inflation is not eroding their purchasing power as quickly as it was earlier this year.

However, consumers should still expect to see some inflation in the coming months. The Fed is still raising interest rates, which will make it more expensive to borrow money.

As a result, consumers may want to start saving more money and reducing their debt.