The US Commerce Department is set to release the July Personal Consumption Expenditures (PCE) price index at 20:30 Beijing time on August 26, a data point the market is watching closely ahead of the Jackson Hole gathering. Expectations point to headline PCE rising 0.1% month over month, while the annual pace is seen easing to 3.6% from 3.7% in June. Core PCE is projected to increase 0.2% on the month, up from 0.1% previously, with the yearly rate holding at 3.3%. That would mark the 65th straight month above the Federal Reserve’s 2% inflation target.
According to BlockBeats, traders are also focused on several possible drivers behind core inflation, including rising prices across the AI supply chain, higher portfolio management fees linked to elevated stock market valuations, and increased energy costs tied to tensions in the Middle East. Goldman Sachs said equity valuation effects alone may have contributed about 0.11 percentage points to July core PCE on a monthly basis. The market is also preparing for a broad methodology revision from the Bureau of Economic Analysis at the end of September, which may affect categories such as computer hardware, stock portfolio management, and legal services, with possible historical revisions adding complexity to inflation analysis. CME FedWatch currently shows a 59.9% probability that the Fed will leave rates unchanged in September and a 40.1% probability of a 25-basis-point hike.
BlockBeats reported on August 26 that the US Commerce Department will release the July Personal Consumption Expenditures, or PCE, price index at 20:30 Beijing time tonight.
Market estimates call for headline PCE to rise 0.1% month over month in July, while the annual rate is expected to ease to 3.6% from 3.7% in June. Core PCE is seen rising 0.2% on the month, up from 0.1%, with the year-over-year reading holding at 3.3%. If that forecast is met, core inflation will have stayed above the Federal Reserve’s 2% target for a 65th consecutive month.
Potential drivers behind core inflation in focus
BlockBeats said several factors could support the core reading, including higher prices across the AI supply chain, increased portfolio management fees driven by elevated stock market valuations, and higher energy costs linked to the situation in the Middle East.
Goldman Sachs estimates that stock valuation effects alone may have added about 0.11 percentage points to July core PCE on a month-over-month basis.
BEA plans a broad PCE methodology revision
The Bureau of Economic Analysis is planning a full adjustment to its PCE statistical methodology at the end of September. The changes may alter how prices are calculated for categories including computer hardware, stock portfolio management, and legal services, and could also include revisions to historical data. That may make the inflation data harder to interpret.
Market split on the Fed’s September path
Expectations for the Federal Reserve’s September decision remain divided. CME FedWatch shows a 59.9% probability that the Fed will keep rates unchanged and a 40.1% probability of a 25-basis-point rate hike.
Markets are also waiting for this week’s Jackson Hole symposium for fresh signals from Federal Reserve Chair Walsh on inflation and the path of interest rates.
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