The latest reading on the Fed's preferred measure of inflation showed prices rising at a pace in line with Wall Street's expectations for July.
The core Personal Consumption Expenditure (PCE) index, which excludes food and energy costs and is closely monitored by the Federal Reserve, rose 0.2% from the previous month in July, in line with Wall Street expectations for a 0.2% increase and the 0.2% reading that seen in June.
Over the previous year, prices rose by 2.6% in July, matching June's annual increase and below analysts' expectations for a 2.7% increase.
The report is the first look at inflation since Fed Chairman Jerome Powell almost confirmed that the Fed will cut interest rates next month during a speech in Jackson Hole, Wyoming, saying that "the time has come for policy to change." Powell added that his confidence has "increased" that inflation is moving toward the Fed's 2% goal.
Friday's report will not change Powell's assessment of the current situation.
Economists have concluded that while lowering inflation remains a priority for the Fed when considering interest rate cuts, concerns about a weakening labor market have also begun to gain attention, said Oxford Economics' Chief US Economist, Ryan Sweet.
"It's not going to be a smooth and easy ride," Sweet also stated on August 23. "There will be bumps along the way with inflation numbers."
Still, Sweet noted that the Fed's preferred measure of inflation remains within close range of the Fed's target.
Investors expect interest rate cuts in September but debate is still raging over how much the Fed will cut. As of Friday morning, the market expected about a 33% chance that the Central Bank would cut interest rates by 50 basis points by the end of its September meeting, according to the CME FedWatch Tool.
