Fed Favored Inflation Gauge’s Mild Gain Sets Stage for Rate Cut

The Federal Reserve’s preferred measure of underlying US inflation rose at a mild pace and household spending picked up in July, reinforcing policymakers’ plan to start cutting interest rates next month.

The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.2% from June, according to Bureau of Economic Analysis data out Friday. On a three-month annualized basis — a metric economists say paints a more accurate picture of the trajectory of inflation — it advanced 1.7%, the slowest this year.

While spending picked up, income growth was much more sluggish and ...