In June, the personal consumption expenditures (PCE) price index, a key inflation measure for the Federal Reserve, rose 0.1% month-over-month and 2.5% year-over-year, aligning with expectations. This increase marked a slight deceleration from the previous month, where the annual rate was 2.6%. Core inflation, excluding volatile food and energy prices, also rose by 0.2% monthly and 2.6% annually, consistent with forecasts. The Fed closely monitors the core PCE as it reflects longer-term inflation trends, which are less affected by temporary price changes.
π The Fed’s key inflation gauge rose 2.5% in June from a year ago, meeting expectations. The PCE price index was in line with forecasts. This data provides valuable insights into the current economic landscape. #inflation #economy #Fed #PCEindex pic.twitter.com/wUlHPzECOD
β TOP X News (@TOPXNews) July 26, 2024
Despite the steady inflation data, personal income only grew by 0.2%, falling short of the anticipated 0.4%. However, consumer spending increased by 0.3%, meeting predictions, as Americans continued to spend, albeit at a moderated pace. This spending, coupled with the slow income growth, resulted in a decline in the personal savings rate to 3.4%, the lowest since November 2022. This trend indicates that consumers are dipping into their savings to maintain spending levels.
The steady inflation figures and the decline in the savings rate have led to increased speculation about the Federal Reserve’s next move. The central bank, which has been on a rate hike pause, is closely watching these economic indicators. There is a growing market expectation that the Fed might cut interest rates in September, potentially marking the first rate reduction since the onset of the COVID-19 pandemic. Futures markets are pricing in a high probability of this rate cut, with further reductions expected by the end of the year.
π£ JUST IN: Fed’s Key Inflation Gauge Rose 2.5% in June, Meeting Expectations π #Economy #Inflation
π Key Highlights:
π Core personal consumption expenditures (PCE) price index rose 0.2% from May.
π Core PCE increased 2.6% year-over-year, as per Bureau of Economicβ¦ pic.twitter.com/nuNi2NC9oY
β Hardik Shah (@AIStockSavvy) July 26, 2024
The report also highlighted that goods prices decreased by 0.2% in June, while services rose by 0.2%. Housing-related prices saw a modest increase of 0.3%, a slight slowdown from previous months, indicating a cooling in this sector. The combination of these factors presents a mixed but cautiously optimistic economic outlook.
Fed officials have been cautious in their public comments, emphasizing that future rate decisions will be data-dependent. They have not committed to a specific policy path, highlighting the uncertainty and variability in economic conditions. The recent data showing stable yet above-target inflation, coupled with slow income growth and consumer reliance on savings, provides a nuanced picture for policymakers.
Direxion ETFs Weekly Playbook: This week, key economic data will be released. Watch for the May PCE index on Friday, the Fedβs preferred inflation indicator.https://t.co/ahFbG9jBx9#Economy #Inflation #PCE #Fed #ETFs
β Tiger Brokers Singapore (@TigerBrokersSG) June 26, 2024
Key Points:
- PCE price index rose 0.1% in June; annual increase at 2.5%.
- Core inflation up 0.2% monthly, 2.6% annually.
- Personal income grew 0.2%, spending increased by 0.3%.
- Personal savings rate dropped to 3.4%.
- Speculation grows about a potential Fed rate cut in September.
Charles William III β Reprinted with permission of Whatfinger News