US inflation remains sticky in July; second-quarter GDP growth unrevised at 1.5%

The above-forecast headline print gave a modest lift to expectations that the Fed may raise interest rates as soon as next month. Fed funds futures prices reflected about a 42% probability of a rate hike at the central bank's September 15-16 meeting after the report, versus about 36% immediately before.

"This is data that supports a hike," said Omair Sharif, founder and president of forecasting firm Inflation Insights. "The unrounded core PCE was 0.246%, so it barely missed out on rounding to 0.3%. That is a one-month annualized rate (of) nearly 3.0%."

The BEA on Wednesday also updated data for economic growth for the second quarter, leaving unchanged its estimate of annualized gross domestic product growth at 1.5%. Among the notable changes from the first estimate was an upward revision to consumer spending during the April-through-June period to 3.4% from the originally reported 3.2%, an indication that the individual consumption that supports two-thirds of U.S. economic activity had held up through the first half of the year.

Aug. 26 (Reuters) - Annual U.S. inflation unexpectedly held steady in July well above the Federal Reserve's 2% target for the 65th straight month, and the pause in the decline from a recent war-induced peak is likely to intensify the central bank's debate over whether interest rates should be lifted or held steady.

The Personal Consumption Expenditures Price Index increased 3.7% in the 12 months through July, unchanged from June, the Commerce Department's Bureau of Economic Analysis said on Wednesday. Economists polled by Reuters had forecast a reading for PCE, which the Fed uses to set its target, of 3.6%.

The month-over-month figure also came in higher than expected at 0.2% in July after falling 0.1% in June, which had been the weakest reading since April 2020. Economists had forecast a 0.1% increase.