财经少华
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The U.S. will announce the PCE index tonight, and the Federal Reserve's rate cut window may be closing
The U.S. will announce its most favored inflation indicator by the Federal Reserve tonight — the Personal Consumption Expenditures Price Index (PCE).
The market expects the PCE price index for April to rise only 0.1% month-on-month, while the year-on-year growth rate is expected to drop from 2.3% to 2.2%, approaching pre-pandemic levels. In terms of core data, the core PCE, excluding the volatility of food and energy prices, is expected to have a month-on-month growth rate of 0.1%, but the year-on-year growth rate will remain high at 2.6%.
Currently, the importance of the PCE is that the Federal Reserve prefers to use it to measure the underlying trends in inflation. Analysts point out that the inflation effects of tariffs imposed by the Trump administration have just begun to seep into the U.S. economy.
Most economists predict that even if Trump relaxes some tariffs, inflation may rebound to 3% in several months. With the U.S. core PCE stuck in the range of 2.8%-2.6% for six consecutive months, the Federal Reserve's rate cut window is closing. Although some Federal Reserve officials still hold a positive attitude towards rate cuts, the interest rate futures market shows that traders' predictions of the probability of a rate cut in September have plummeted from 68% a week ago to 47%. The U.S. economy is standing at a crossroads of a new inflation cycle.
The U.S. will announce its most favored inflation indicator by the Federal Reserve tonight — the Personal Consumption Expenditures Price Index (PCE).
The market expects the PCE price index for April to rise only 0.1% month-on-month, while the year-on-year growth rate is expected to drop from 2.3% to 2.2%, approaching pre-pandemic levels. In terms of core data, the core PCE, excluding the volatility of food and energy prices, is expected to have a month-on-month growth rate of 0.1%, but the year-on-year growth rate will remain high at 2.6%.
Currently, the importance of the PCE is that the Federal Reserve prefers to use it to measure the underlying trends in inflation. Analysts point out that the inflation effects of tariffs imposed by the Trump administration have just begun to seep into the U.S. economy.
Most economists predict that even if Trump relaxes some tariffs, inflation may rebound to 3% in several months. With the U.S. core PCE stuck in the range of 2.8%-2.6% for six consecutive months, the Federal Reserve's rate cut window is closing. Although some Federal Reserve officials still hold a positive attitude towards rate cuts, the interest rate futures market shows that traders' predictions of the probability of a rate cut in September have plummeted from 68% a week ago to 47%. The U.S. economy is standing at a crossroads of a new inflation cycle.
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