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The core personal consumption expenditures price index in July is expected to rise 0.2% month-on-month and 4.2% year-on-year.
As Powell emphasized data dependence, the Fed left the door open for another rate hike.
Before the PCE inflation data is released, the US dollar faces two-way risks.
The U.S. Bureau of Economic Analysis (BEA) will release the core personal consumption expenditures (PCE) price index, the inflation indicator favored by the Federal Reserve (FED), at 20:30 Beijing time on Thursday, August 31.
What to expect from the Fed’s preferred PCE inflation report?
The core personal consumption expenditures (PCE) price index, which excludes food and energy, is expected to rise 0.2% month-on-month in July, matching June’s gain. The core PCE price index is expected to rise 4.2% for the full year, up slightly from 4.1% in June.
The overall PCE price index is expected to increase by 0.2% month-on-month in July, while the full-year PCE price index is expected to increase by 3.3% after recording a 3% increase in June.
In his opening remarks at the Jackson Hole symposium, Federal Reserve Chairman Jerome Powell said: “On a 12-month basis, total U.S. inflation, the ‘title’ PCE inflation rate, reached 7% in June 2022. From its peak, it dropped to 3.3% as of July, a trajectory that is broadly consistent with global trends.”
“On a 12-month basis, core PCE inflation peaked at 5.4% in February 2022 and gradually eased to 4.3% in July,” Powell added.
While these comments may suggest that Powell leaked July PCE data, the document accompanying the press release accompanying Powell’s remarks stated that “the July 2023 data points were estimated based on Consumer Price Index and Producer Price Index data.”
Still, the chairman’s speech seemed to reduce the importance of the PCE inflation report and may even have removed the element of surprise.
Michael Hewson, chief market analyst at CMC Markets, expressed his views on the upcoming PCE data:
“July’s inflation data may raise further concerns about the stickiness of inflation if our monthly and annual headline inflation data move significantly higher. CPI data released earlier in August showed that after headline CPI moved higher to 3.2%, It may be difficult for prices to move significantly lower. We expect a similar trend in this week’s data, with the deflator rising to 3.3% and the core deflator rising to 4.3%.”
