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A Crucial Inflation Reading is Coming: What to Expect
This Friday, the Commerce Department is set to release a highly anticipated economic report that could bring positive news on inflation. The Personal Consumption Expenditures (PCE) Price Index, closely watched by the Federal Reserve, is expected to show minimal to no monthly growth in May, marking the first time since November 2023. The Core PCE Price Index, which excludes volatile food and energy prices, is projected to reveal its lowest annual figure since March 2021, a pivotal moment when it initially surpassed the Fed's 2% inflation target.
Despite successive interest rate hikes, the central bank has struggled to bring price increases back within its desired range. Forecasts from Dow Jones suggest a steady headline PCE price index for the month, with the core index expected to show a slight increase. These figures, if realized, would reflect a notable milestone. According to Beth Ann Bovino, Chief Economist at U.S. Bank, the softening of core PCE prices aligns with forecasts, marking positive news for both the Fed and consumers, albeit the impact may not yet be widely felt.
While inflation rates have declined from their peak in mid-2022, prices have remained elevated. The ongoing challenge for Fed officials is evident in the 14% rise in core PCE since March 2021. Despite progress following rate hikes initiated in March 2022, Fed Governor Lisa Cook emphasizes that achieving sustainable inflation at 2% remains a work in progress. Market expectations point towards potential rate cuts later this year, with September being a likely target for the first quarter-percentage-point reduction.
In addition to the inflation figures, the Commerce Department will also release data on personal income and consumer spending. Projections indicate modest increases in both, underscoring the complex economic landscape that policymakers continue to navigate with caution and vigilance.
Original Article: https://www.cnbc.com/2024/06/27/theres-a-big-fed-inflation-reading-coming-friday-heres-what-to-expect.html
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