CNBC: Fed’s preferred inflation gauge (core PCE) rises 3.3% y/y in July

CNBC reports that the Fed’s preferred inflation gauge, the PCE price index, increased 0.2% in July on a seasonally adjusted monthly basis, taking the annual headline pace to 3.7%. The article notes these figures were slightly above the Dow Jones consensus. It also highlights that core PCE, excluding volatile food and energy, rose 0.2% for the month and 3.3% year-on-year, broadly in line with forecasts.

The release also contained signals about the demand-and-cost backdrop. CNBC says personal income grew 0.4% while spending increased 0.2%, both stronger than expected. On the price breakdown, goods prices fell 0.1% in the month, with declines attributed to gasoline and other energy-related goods, and lower costs in furnishings and durable household equipment. Services prices rose 0.3%, with particular mention of financial services and insurance and a rise in housing.

For FX traders, the key context is what this implies for inflation staying above the Fed’s 2% objective, especially given the article’s framing that policymakers still have to judge whether cooling in monthly readings amounts to durable disinflation. The report arrived before the Fed’s policy gathering on 15-16 September, and the article states markets were pricing only about a one-in-three probability of a move then.

What to watch next is whether subsequent inflation prints continue to show that core trends are easing without being offset by services components or a resurgence in energy-related pressures, as that would influence expectations for the Fed’s timing and magnitude of any adjustment.