The rates rose in July due to another jump in the cost of services, according to the government data published on Thursday.

(Photo: wsj.com)

An inflation measure that is closely monitored by the Federal Reserve rose higher in July; raising the possibility that the Federal Reserve will raise interest rates again.

According to Digital Journal, the figure maintains the pressure on the Federal Reserve as it looks to bring inflation firmly back down to the long term target of 2 percent through a series of interest rate hike.

There has been a large expectation on the Federal Reserve by analysts and traders to hold its benchmark lending rate steady at its next meeting on September 12 to 20. The Federal Reserve officials have not rules out raising rates again, if it is needed.

The annual personal consumption expenditures or PCE price index has rose at 3.3% in July, this is up from a two year low of 3.0% a month earlier, announced by the Commerce Department in a statement. The move was fueled by an increase in the price of services, which has recorded a 12 month rise of 5.2%, This is in stark contrast to the price of goods that has decreased by 0.5%.

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PCE has increased by 0.2% as it did in June. Personal income, however, increased at monthly rates of 0.2%.

According to USA Today on MSN, Federal Reserve Chair, Jerome Powell, said that officials are not concerned about the stubborn inflation for services. They exclude volatile food, energy, housing, and their costs are tied closely to fast rising employee wages. The prices of so called supercore services have jumped 0.5% in July after an upwardly revised 0.3% bump on the previous month.

That may boost the odds of another rate hike because the Federal Reserve traditionally focuses more intently on PCE than CPI inflation. Nationwide economist, Ben Ayers, thinks that the Federal Reserve could lift rates again in September, While the firm, Barclays, wrote in a research note that they remain skeptical that inflation is on track to return to the Federal Reserve’s target of 2% without a significant easing of labor market conditions. 

The robust increase in spending could push the prices higher and along with a solid economy could help the Federal Reserve to raise interest rates again this year. Consumption, however, could slow this fall as many Americans resume student loan payments that were suspended by COVID relief legislations.

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