U.S. Inflation Gauge Stays at 2.6%, Core Prices Edge Higher/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Fed’s preferred inflation gauge held steady at 2.6% in July, while core prices climbed to 2.9%. Consumer spending rose 0.5%, the strongest since March, showing Americans remain resilient despite high rates. Fed officials remain cautious ahead of September’s rate decision.
U.S. Inflation Quick Looks
- Inflation held at 2.6% in July, unchanged from June
- Core inflation rose to 2.9%, highest since February
- Monthly consumer prices increased 0.2%
- Consumer spending up 0.5%, strongest since March
- Incomes rose 0.4% on higher wages and salaries
- Fed hesitant to cut rates despite Trump pressure
- Powell signals possible September rate cut
- Borrowing costs could ease for mortgages, cars, and business loans
- Trump criticizes Powell, calls him “Too Late” and “moron”
- Trump also attempted to fire Fed Governor Lisa Cook
Deep Look: Inflation Gauge Holds Steady While Core Prices Increase
WASHINGTON — August 29, 2025 — The Federal Reserve’s preferred inflation measure remained steady in July, though underlying core inflation inched higher, underscoring the Fed’s cautious approach to interest rate cuts even as President Donald Trump escalates pressure for easier monetary policy.
According to the Commerce Department, overall prices rose 2.6% year-over-year, the same pace recorded in June. Stripping out food and energy, core prices climbed 2.9%, up from 2.8% in June — the highest reading since February.
While inflation is well below the 7% peak reached three years ago, it remains above the Fed’s 2% target, explaining policymakers’ reluctance to ease rates too aggressively.
Monthly Inflation and Spending Trends
On a month-to-month basis:
- Headline consumer prices rose 0.2% from June to July, down slightly from 0.3% the month prior.
- Core prices increased 0.3% for the second straight month.
Meanwhile, consumer spending jumped 0.5%, the biggest increase since March. Americans splurged on long-lasting goods such as cars, furniture, and appliances, many of which are imported.
Incomes rose 0.4%, supported by stronger wages and salaries, reinforcing the idea that households remain willing to spend despite high borrowing costs and ongoing economic uncertainty.
Fed Caution vs. Trump Pressure
Fed Chair Jerome Powell has signaled that the central bank is leaning toward a rate cut in September, but policymakers remain wary.
Typically, lower rates reduce borrowing costs for mortgages, auto loans, and business lending, but they also risk fueling higher inflation if cuts come too soon.
President Trump has been relentless in criticizing Powell, labeling him “Too Late” and a “moron,” while insisting there is “no inflation.” Earlier this week, Trump attempted to fire Fed Governor Lisa Cook, a move seen as part of his broader effort to exert more influence over the central bank.
What It Means Going Forward
The July data highlights the mixed signals facing the Fed:
- Inflation has cooled significantly from its highs, but progress toward the 2% goal has stalled.
- Consumer spending and income gains suggest households remain resilient.
- Political pressure from the White House adds uncertainty to the Fed’s independence.
With the next policy meeting set for Sept. 16–17, markets widely expect at least one rate cut, though the path for additional reductions remains unclear.
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