Key inflation gauge remains elevated during Iran conflict and ongoing US trade fights

The personal consumption expenditures price index, a gauge closely monitored by the Federal Reserve, remained above the 2% target in July, a sign that inflation continues to trouble many Americans amid the Iran conflict and ongoing US trade disputes. Gas prices fell during the month, yet service costs, including healthcare, utilities, and financial services, surged.

The Commerce Department's report indicated prices increased 3.7% year-over-year, mirroring the rise in June. The inflation rate has risen since the U.S. and Israel attacked Iran in late February, when the rate was 2.9%, surpassing the Fed's target. For the month, overall prices climbed 0.2% from June, following a decline in May.

Core inflation, excluding volatile food and energy costs, stayed unchanged at 3.3% in July. Some Fed officials suggest core inflation at about 0.2% monthly would signal a return to the 2% goal. Changes are planned to the PCE calculation, beginning next month, which could lower the measured inflation rate. Despite a recent dip in consumer sentiment, Americans continue to express economic and financial anxiety, as inflation has hindered income growth.

Gas prices, currently averaging $4.10 per gallon, are expected to push inflation higher in the upcoming August figures. The economy grew by 1.5% in the second quarter, largely due to imports, but consumer spending, adjusted for inflation, remained flat in July.