In its July Monetary Policy Report submitted to Congress, the Federal Reserve stated that U.S. inflation has risen again this year. The headline PCE price index rose 4.1% year-over-year in May, while core PCE increased 3.4% year-over-year, driven mainly by higher tariffs, rising energy prices amid Middle East conflicts, and increased demand for AI-related high-tech products. The U.S. labor market remained generally steady, with a June unemployment rate of 4.2% and an annualized real GDP growth rate of 2.1% in the first quarter. The FOMC has kept the federal funds rate target range at 3.5% to 3.75% since the start of the year, reaffirming the goal of achieving price stability. The report also included June economic projections: Fed officials’ median forecasts for 2026 headline PCE inflation and core PCE inflation are 3.6% and 3.3% respectively, with the median year-end federal funds rate forecast at 3.8%, up from the 3.4% forecast in March.