What to anticipate from the release of the Fed’s favored inflation measure on Friday
Federal Reserve officials are set to receive the latest update on their preferred Inflation measure on Friday, which could impact the upcoming rate decision in September. The Commerce Department is scheduled to release the personal consumption expenditures price index, a key indicator that the Fed uses to gauge Consumer prices and spending habits. The core PCE measure, excluding food and energy, is closely monitored by policymakers when making interest rate decisions.
The consensus for the July reading suggests minimal changes in Inflation trends, with both headline and core prices expected to increase by 0.2% monthly and 2.5% and 2.7% annually, respectively. If the actual readings align with the forecast, it is unlikely to deter the Fed from proceeding with the anticipated interest rate cut at the September policy meeting.
While Fed officials remain cautious about Inflation, recent statements indicate a more optimistic outlook. The Central bank targets Inflation at 2% annually. Fed Chair Jerome Powell expressed growing confidence that Inflation is returning to target levels, but also highlighted concerns about the slowing labor market, signaling a shift towards focusing more on employment support rather than Inflation control.
Despite the focus on Inflation data, the Fed’s attention seems to be shifting towards preventing a labor market downturn and overall economic slowdown. This shift could mean that upcoming reports, such as the August nonfarm payrolls on September 6, will have a more significant impact on monetary policy decisions.
In addition to the Inflation figures, the upcoming reports will also include personal income and consumer spending data for July, with expectations of a 0.2% increase in personal income and a 0.5% rise in consumer spending.
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Lucas Bennett, completed his Finance degree at Bocconi University in Italy in 2018. He is highly skilled in corporate finance and risk management, beginning his career at a hedge fund in Milan. Lucas expertise extends to consulting for leading European firms, particularly within the energy markets sector. His analytical skills and strategic mindset have made him a sought-after consultant, and he continues to explore new opportunities within the financial services industry across Europe.