Truflation has called for the Federal Reserve to cut interest rates after its July forecast came within 0.01 percentage point of the official monthly headline PCE reading and matched the other three published figures.
Summary
- Headline PCE rose 0.2% monthly and remained at 3.7% annually in July.
- Truflation forecast the published readings five days before the BEA released its report.
- Oliver Rust said weaker spending, lower gasoline prices, and mixed labor data support a rate cut.
- Fed officials remain concerned about inflation as services, wages, and tariffs keep pressure on prices.
The U.S. Bureau of Economic Analysis reported on Aug. 26 that the PCE Price Index rose 0.2% month over month in July, reversing a 0.1% decline recorded in June. Annual headline inflation remained unchanged at 3.7%.
Core PCE, which excludes food and energy, also increased by 0.2% on a monthly basis and held at 3.3% from a year earlier. The Federal Reserve uses PCE as its preferred measure of inflation and has set a long-term inflation target of 2%.
Five days before the government release, Truflation estimated that headline PCE would increase 0.19% monthly and stay at 3.7% annually. Its forecast placed monthly core PCE at 0.2% and the annual reading at 3.3%.
The 0.19% headline estimate rounds to the 0.2% figure published by the BEA, although the two figures were not identical before rounding. Truflation matched the remaining three figures at the precision used in the official release.
Truflation has called the data a turning point
Speaking directly to crypto.news after the PCE release, Truflation Head of Data Oliver Rust said softer household demand, mixed employment data and falling gasoline prices have created a case for lower borrowing costs.
“Truflation is of the opinion that we have reached a turning point that needs the Fed to cut rates. We are seeing a softening in demand, i.e., spending.”
Official data offered some support for the demand side of Rust’s argument. The BEA said inflation-adjusted personal consumption expenditures were almost unchanged in July, down from a 0.4% increase in June.
Current-dollar spending rose by $36.3 billion as an $86.2 billion increase in services was partly offset by a $49.9 billion decline in goods. Personal income increased 0.4%, while disposable personal income gained 0.5%.
Households saved $712 billion during the month, leaving the personal savings rate at 3%. Truflation’s report said declining excess savings and increased reliance on credit could reduce consumer demand during the second half of 2026.
Retail sales also fell 0.6% in July, according to the report, ending an eight-month run without a monthly decline. Truflation attributed the drop to fading support from tax refunds, higher energy expenses, and more cautious discretionary purchases.
Rust said the labor market continues to show a “low-hire, low-fire environment.” Truflation’s report placed unemployment at 4.1% and said labor-force participation had fallen to 61.4% after nearly 1.4 million people left the workforce during 2026.
TruPCE maps live prices to BEA categories
Asked how the company makes its data comparable with the government index, Rust said Truflation assigns its price information to the BEA’s PCE category definitions and then applies the agency’s category weights.
The resulting measure, called TruPCE, is designed to track the government index while offering earlier guidance. Rust said Truflation’s data leads the BEA measure by an average of approximately 30 days.
Truflation says its indexes use more than 15 million product prices from over 30 data partners and sources. The company publishes its readings daily, while the BEA releases PCE figures monthly and can revise previous estimates as more information becomes available.
July represented only the fourth PCE forecast Truflation has published, according to Rust. He said the company also matched the previous month’s result and missed the April and May readings by 0.1 percentage point each.
The limited sample means the supplied figures do not provide a 12-month average forecasting error or a full comparison with economists’ estimates. Market consensus had placed July annual headline PCE at 3.6%, while forecasts for core inflation matched the eventual 3.3% reading.
In July, crypto.news reported PCE cooling from 4.1% in May to 3.7% in June as Bitcoin approached $65,000. July’s new reading left the annual rate at the same level rather than extending the decline.
Services and food kept inflation elevated
Housing carried the largest weight in Truflation’s July model, while gasoline created the strongest downward pressure, Rust said. Services and groceries produced the largest upward contributions.
Truflation’s underlying data showed gasoline and other energy goods falling 3.36% from June, although the category remained 23.6% higher than a year earlier. Clothing and footwear declined 0.7% monthly but increased 4.24% annually.
Food services and accommodation prices rose 1.21% during July and 3.61% over the year. The report attributed the monthly increase to summer travel, hotel demand, and restaurants passing higher labor and operating expenses to customers.
Transportation services climbed 1.13% monthly and 12.25% annually, led by airfares and public transportation costs, according to Truflation. Grocery prices increased 1.09% from June, with beef, coffee, and internationally traded food commodities adding pressure.
Wage growth presents another risk to Rust’s rate-cut argument. Truflation estimates that annual pay growth has remained between 4% and 4.5% since the middle of 2025, a rate the company says can sustain inflation in labor-intensive services.
Tariffs, oil prices, and electricity demand could also prevent a steady decline. The report said repeated tariff changes involving China, Canada, Mexico, and the European Union were becoming more visible in apparel and vehicle prices.
Utility prices rose 0.98% monthly and 7.64% annually in Truflation’s data, reaching their highest rates since mid-2024. The company linked some of the pressure to rising electricity use and infrastructure needs associated with artificial intelligence.
Fed officials have remained cautious about cuts
Rust’s call for lower rates stands apart from the current debate inside the Federal Reserve. Kansas City Fed President Jeffrey Schmid said on Aug. 27 that the existing 3.5%–3.75% policy range did not appear restrictive enough to return inflation to 2%, according to Reuters.
Chicago Fed President Austan Goolsbee also described persistent inflation as concerning, although he said rates could fall over time if the data showed prices moving back toward the central bank’s target.
Truflation’s Aug. 21 report had taken a less aggressive position than Rust’s post-release comments. The document projected that the Fed would leave rates unchanged in September and avoid another increase during the rest of 2026, rather than forecasting an immediate cut.
Bitcoin showed little initial reaction to the PCE release, trading around $78,353 approximately 36 minutes after the figures arrived, compared with a pre-release range of roughly $78,500 to $79,000. The 10-year Treasury yield moved about one basis point higher to 4.65%.
Earlier in the week, a Bitcoin catalyst report identified July PCE and Federal Reserve Chair Kevin Warsh’s Jackson Hole appearance as the main U.S. macro events facing crypto traders. Warsh is scheduled to deliver his keynote on Aug. 28 as markets seek guidance on the next interest-rate decision.
