As we close out August and look towards some Fall, the inflationary data points continue to remain front and center. The Fed’s preferred inflation gauge, the PCE index, held at a 3.7% annual pace in July, a touch above expectations, with core inflation at 3.3%. Inflation remains stickier than hoped, which is exactly the backdrop Fed Chair Kevin Warsh addressed in his Jackson Hole speech this morning (discussed below). First some context to share:
Key Inflation Numbers (July 2026)
• Headline PCE (Monthly): Up 0.2%, slightly higher than the 0.1% forecast.
• Headline PCE (Year-over-Year): Up 3.7%, slightly above the 3.6% expected rate.
• Core PCE (ex-food & energy /Monthly): Up 0.2%, matching expectations.
• Core PCE (Year-over-Year): Held steady at 3.3%, also matching market forecasts.
Income and Spending
• Personal Income: Rose 0.4% in July, beating anticipated growth.
• Consumer Spending: Increased 0.2%, driven by gains in services, while spending on goods declined.
• Real PCE: Remained virtually flat, rising less than 0.1%.
Consumers pulled back a bit in real terms even as their paychecks grew, meaning that households may be building a little more of a cushion as prices stay elevated.
That brings us to Jackson Hole, the real story of the week. Fed Chair Kevin Warsh delivered his first keynote as chair this morning to a packed audience. The timing of his remarks comes at an interesting intersection of the Fed’s July meeting producing a rare 9-3 split vote and long-term Treasury yields at nearly two-decade highs. Warsh said this summer’s inflation readings, while better than expected, “do not tell me that underlying trends have meaningfully improved,” and stressed the Fed “must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.” True to his style so far as chair, he stopped short of giving markets clear guidance on the Fed’s next move, saying he doesn’t want investors “looking primarily to the Fed for their next trade.” Markets took the speech in stride. Stocks were little changed, while short-term yields rose modestly and long-term yields eased slightly, as traders read his tone as a bit more hawkish on inflation without a hard commitment either way. Treasury Secretary Scott Bessent’s move to double the government’s bond buyback program remains in the background as officials work to keep long-term borrowing costs in check. Stay tuned.
Looking Ahead
• Fed’s next steps: Warsh kept his options open on rates — we’re watching fed funds futures and upcoming inflation data for clues on September.
• U.S.-Canada tariff tensions: The U.S. imposed 50% tariffs on about $20 billion of Canadian goods after talks broke down, and Canada plans to match “dollar for dollar” starting September 8 — we’re watching for any sign talks resume.
• Interest bearing investments: Elevated long-term yields continue to make the income side of portfolios more attractive on a relative basis.
Interesting to Note
Nvidia beat estimates on both earnings and guidance this week, but the stock slipped anyway, as investors focus more on shrinking profit margins than on strong headline growth. It’s a reminder that expectations for AI-related companies are now so high that even good news doesn’t guarantee a stock will rise.
Have a nice weekend!
Written by: Chris Wasson, CFP®
Sources:
CBS News: July PCE Inflation Index Held at 3.7% Annual Pace
U.S. Bureau of Economic Analysis: Personal Income and Outlays, July 2026
Investor’s Business Daily: July PCE Inflation, Fed, and Warsh’s Jackson Hole Speech
CNN Business: Consumers Pulled Back on Spending in July
NBC News: Canada Trade Talks Collapse, 50% Tariffs Take Effect
NPR: Carney Says Canada Will Match Tariffs Dollar for Dollar
Bloomberg: Nvidia Second Quarter Earnings Live Updates
24/7 Wall St.: Nvidia Has Fallen After Four Straight Earnings Beats
Federal Reserve Bank of Kansas City: 2026 Jackson Hole Symposium Announcement
CNBC: Warsh Expresses Concern About Inflation, Advocates for ‘Quieter’ Central Bank
CNBC: Stock Market Today, Live Updates, Aug. 28, 2026
ScienceDaily: Strange & Offbeat News, Switzerland Soil Experiment
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