PCE Inflation Cools, Underlying GDP Growth Strong As Markets Test Warsh Fed

The Fed's primary inflation gauge, the core PCE price index, was a bit tamer than expected in June, while second-quarter GDP growth missed economist forecasts, though consumer spending accelerated and business investment was solid. The stakes for incoming data have grown following Wednesday's Federal Reserve meeting as markets appeared to test the inflation-fighting credibility of new Chairman Kevin Warsh. While short-term Treasury yields fell after the Fed kept its benchmark interest rate unchanged, long-term Treasury yields rose in what Wall Street refers to as a bear steepening of the Treasury yield curve.