Investing.com -- The pace of annual inflation in the U.S. accelerated last month, while jobless claims declined, bolstering predictions that the Federal Reserve may keep interest rates on hold at its next policy meeting in September.
The Commerce Department's personal consumption expenditures (PCE) index rose by 3.3% in the 12 months through July, meeting estimates. The figure was faster than an increase of 3.0% in the prior month.
On a monthly basis, the number was unchanged as anticipated at 0.2%.
Meanwhile, the core reading, which strips out volatile items like food and energy, quickened to 4.2% year-on-year and held steady at 0.2% month-on-month.
The PCE price indices are the Fed's preferred measures for its 2% inflation target. Corralling runaway price gains has been a central focus of the central bank's long-standing campaign of borrowing cost hikes, which has pushed the key federal funds rate up from near-zero to a range of 5.25% to 5.50%.
Data this week has suggested that the elevated interest rate environment may also be weighing on what has been a recently strong U.S. labor market. Job openings and resignations declined in July, while private payrolls growth slowed in August.
On Thursday, separate data from the Labor Department showed that first-time claims for unemployment benefits slipped to 228,000 in the week ended on August 26, down from an upwardly revised mark of 232,000 in the prior week. Economists had predicted that claims would edge higher to 235,000. The four-week moving average, which smooths out some of the week-to-week volatility, ticked up marginally by 250 to 237,500.
The Fed has made cooling labor demand a major objective of its tightening cycle, with policymakers hoping that this trend could help slow wage growth and, in turn, alleviate some inflationary pressures.
Investors may receive a fuller picture of the job market on Friday when the crucial nonfarm payrolls report is released. The U.S. economy is projected to have added 170,000 roles in August, down from 187,000 in the previous month.