The Federal Reserve’s preferred inflation measurement came in line with expectations and further fueled the expectations of aggressive rate cuts at the Fed’s upcoming meeting in September.
The report shared by the Commerce Department on Friday showed that the Personal Consumption Expenditures (PCE) index rose by 0.2% in July, coming at a 2.5% increase on a year-over-year basis. The same mark was projected by economists.
On the other hand, the core PCE index, which excludes food and energy prices and is the Fed’s preferred measure of inflation, also increased by 0.2% and is currently 2.6% up compared to the same period in 2023. The jump from June was in line with Wall Street’s forecasts, while the year-over-year jump actually came slightly below the estimated 2.7% mark.
Other data in the report included a 0.3% increase in personal income on a monthly rate, more than 0.2% expected, while consumer spending jumped by 0.5%, in line with estimates.
Experts believe that favorable inflation numbers will allow the Fed to be more aggressive with its rate cuts.
“A Fed rate cut in September is assured after Chair Powell’s Jackson Hole speech,” Ben Ayers, senior economist at Nationwide, stated in a note sent to clients on Friday. “But the further cooling of inflation could give the Fed leeway to be more aggressive with rate declines at coming meetings, especially if the labor market shows a steep deterioration.”