Fed Heads Into July FOMC With Inflation at a Crossroads

The Federal Reserve's two-day FOMC meeting begins on July 28, and the central bank is walking into it with a data picture that is genuinely hard to read. Headline CPI fell sharply to 3.5% year-over-year in June, the largest single-month decline since April 2020. The Fed's preferred inflation gauge, core PCE, tells a different story: it rose to 3.4% year-over-year in May, 140 basis points above the 2% target and trending in the wrong direction from April's 3.3% reading. Key Takeaways Headline CPI dropped to 3.5% YoY in June 2026, the sharpest one-month decline since April 2020, driven entirely by a 5.7% plunge in energy prices per BLS data. Core PCE rose to 3.4% YoY in May 2026, 140 basis poi…