WASHINGTON — U.S. inflation remained elevated in July, creating a fresh challenge for businesses and investors already navigating higher borrowing costs and uncertain monetary policy.

The latest data showed annual inflation at 3.7% in July, well above the Federal Reserve's 2% target. The reading is complicating expectations about future interest-rate decisions as policymakers balance persistent price pressures against the need to support economic growth.

For American businesses, prolonged higher rates can increase the cost of corporate borrowing, expansion projects and investment. Companies that rely heavily on financing may face greater pressure if rates remain elevated for longer.

Wall Street is now watching Federal Reserve Chair Kevin Warsh's upcoming Jackson Hole speech for clues about the central bank's next moves. Market expectations have become more cautious as inflation remains sticky.

The broader economy is showing mixed signals. Second-quarter GDP growth was reported at 1.5%, while inflation-adjusted consumer spending was flat in July, adding another layer of uncertainty for companies dependent on household demand.

The combination of persistent inflation, uncertain interest rates and softer consumer spending could become an important test for U.S. businesses during the second half of 2026.