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Fed PCE Inflation Gauge Surges To 4.2%, Personal Incomes Rise, Spending Slows

The Federal Reserve's preferred inflation gauge raced to its highest level since 1990 last month, data from the Bureau of Economic Analysis indicated Friday.

The Federal Reserve's preferred measure of U.S. inflation accelerated again last month, rising at the fastest pace in three decades, ahead of Chairman Jerome Powell's keynote address to the Jackson Hole symposium later today.

The core July PCE Price Index rose 3.6% from last year, easing from the multi-decade highs recorded in June, and 0.3% on the month, the Bureau of Economic Analysis reported, largely in line with Wall Street forecasts but still adding to investors concerns about the sticky nature of consumer prices. The June increase was 0.5%. 

The headline PCE index was up 0.4% on the month and 4.2% on the year, the highest since 1990. Personal income rose by a stronger-than-expected 1.1%, while personal spending rose 0.3%, the BEA noted, match the Street consensus forecast.

U.S. stocks were little-changed following the data release, with futures contracts tied to the Dow Jones Industrial Average indicating a 75 point opening bell gain and those linked to the S&P 500 priced for an 11.5 point advance.

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Benchmark 10-year notes were little-changed at 1.345% while the dollar index was pegged 92.997 against a basket of six global peer currencies.

Earlier this month, the BLS said U.S. consumer price inflation accelerated at the fastest pace in thirteen years -- 5.4% -- for the second consecutive month in July, but noted that core inflation, which strips out volatile food and energy costs, eased to an annual rate of 4.3%.

July retail sales, meanwhile, fell 1.1% from the previous month, notably shy of Wall Street forecasts, suggesting the recent surge in Delta-variant infections is beginning to impact consumer strength in the world's biggest economy.