The July Personal Consumption Expenditures (PCE) report, released today by the U.S. Department of Commerce, showed that the overall PCE price index rose by 3.7% year-over-year, and core PCE (excluding food and energy) increased by 3.3% year-over-year. Both figures exceeded economists' expectations and were well above the Federal Reserve's 2% target. As a result, the market-implied probability of a Federal Reserve rate hike in September rose from approximately 36% before the report's release to 44%. The report noted that Federal Reserve Chair Kevin Warsh had previously declined to provide forward guidance, making persistent inflation data the primary driver of a potential rate hike in 2026. At the July Federal Open Market Committee (FOMC) meeting, three members already voted in favor of a 25 basis point rate hike, meaning only four more votes are needed to form a majority for a rate increase.