Investing.com -- Underlying U.S. inflation pressures are set to persist when the Bureau of Economic Analysis releases the July Personal Consumption Expenditures Price Index on Wednesday, but not enough to force the Federal Reserve into a rate hike this year, according to Truflation.

Investing.com’s early look at the independent inflation data provider’s forecasts reveals that headline PCE is expected to hold steady at 3.7% year over year, rising 0.19% month over month, broadly in line with market expectations.

Core PCE is projected to rise 0.2% month over month, with the annual rate holding at 3.3%.

"Despite market expectations, Truflation's view remains consistent: the Fed is likely to leave rates unchanged at the September meeting and is unlikely to hike interest rates during the remainder of the year," the firm said in its monthly report.

Markets are pricing a 65% probability of a hold in September, with roughly 40% pricing a hike by October and 45% by December.

Truflation flagged four areas of increasing concern, including tariffs becoming a recurring source of price resets rather than a one-off adjustment; the Middle East conflict feeding through to jet fuel, freight and transport costs; wage growth still running at 4.0% to 4.5%; and AI-driven electricity demand, with utilities up 7.64% year over year, the highest since mid-2024.

Category detail showed transportation services up 12.25% annually and food services and accommodations up 3.61%, while gasoline fell 3.36% on the month.

On the consumer side, Truflation noted retail sales unexpectedly fell 0.6% in July, the first decline in nine months, adding that signs of strain are beginning to emerge.

“Major retailers such as Walmart and Lowe’s have noted that shoppers are becoming more selective and cautious. Walmart posted its slowest sales growth in six years, suggesting that middle- and lower-income households are cutting back as inflation and rising fuel costs continue to pressure disposable income,” the firm wrote.