The core PCE in the second quarter of the United States met expectations, and everyone can breathe a sigh of relief for the time being. The Fed must be thinking: "Hey, finally didn't screw up." After all, after a series of fierce interest rate hikes, inflation finally stopped running wild like a wild horse. The core PCE remained at the expected level, as if giving the market a "reassuring" vaccine, conveying the message: "Don't panic, everything is under control - at least it seems so."
But you have to think about it, meeting expectations does not mean any surprises or miracles, but just means that the bad things everyone expected did not happen. The market may be more like an audience holding popcorn to watch a suspense film, nervously waiting for the horror scene, but the movie passed by lightly, without even a ghost scream. The core PCE is such a role: you thought it would explode, but it was very obedient and followed the script. Everyone clapped, but no one would stand up and cheer.
The Fed can probably be a little complacent, thinking that it is like a steady captain who has successfully stabilized the big ship of inflation. But the question is, is the captain "actively controlling the ship" or "lucky that the ship didn't break down"? To be honest, the market doesn't know. If the core PCE goes off the chart, the ship may hit an iceberg, and the Fed will be scolded and have to continue raising interest rates, causing the stock market to dive again. Now, the data is as expected, and the stock market masters can clap their hands, relax their muscles, and think: "Hey, I can hold on for a few more days."
But don't be too happy too early. Meeting expectations is just a short-term calm, like "the quiet before the storm". After all, the Fed is not a fuel-saving lamp. Maybe it will continue to raise interest rates carefully in the future, but not as fiercely as before. Who knows if there will be another "black swan" event next, causing the core PCE to get out of control again?
So, everyone should sit tight, don't just think that the current "meeting expectations" is a stable happiness, it may just be a temporary consolation prize, after all, the market has always been a moody guy.