Sticky PCE and Resilient Consumers Force the Fed Into a Harder Corner Ahead of Jackson Hole

Core PCE — the Fed's preferred inflation gauge — held at 3.3% year-on-year in July, while headline PCE accelerated to 3.7%, defying expectations for a slowdown to 3.6%. Monthly headline prices rose 0.2%, overshooting the 0.1% consensus. At nearly double the Fed's 2% target, these numbers just killed whatever was left of the soft-landing optimism.

Behind the Data

Here's where it gets worse for the doves. The Bureau of Economic Analysis revised Q2 GDP and...