July PCE: The FED inflation scale remained high

Federal reserve prefers Inflation scale It showed that inflationary pressures remained high in July, as the central bank weakens the low interest rate in its meeting next month.

The Trade Administration stated on Friday that Personal consumption expenses (PCE) The index increased by 0.2 % of one month in July and remained by 2.6 % on an annual basis, in line with the expectations of Economists.

Core PCE, which excludes the prices of volatile food and energy, increased by 0.3 % on a monthly basis and 2.9 % from last year, in line with economists estimates.

Federal Reserve Policy makers focus on the main PCE number as they try to re -inflation to their long -term target of 2 %, although they look at the basic data as a better inflation indicator. The main PCE remained fixed at 2.6 % in July of the previous month, while Core PCE increased from 2.8 % to 2.9 % – the highest level since February.

The Federal Reserve Chairman refers to the labor market in the Federal Reserve in the labor market

Goods prices It increased by 0.5 % in July of the same month last year, as the prices of strong goods increased by 1.1 % and only 0.2 % inactive goods.

Service prices were 3.6 % higher in July compared to last year, with a slight increase of 3.5 % reading in June.

Wages and salaries increased by 0.6 % in July of the previous month, which is a recovery after June, which witnessed an increase of 0.1 %, which was the slowest monthly growth since November at least.

the Personal savings rate As a percentage of personal income available by 4.4 %, it has not changed from the previous month.

Federal reserve preparations show inflation fears that exceed the job market in the interest rate decision in July

The PCE report of the Ministry of Trade comes to Federal Reserve It monitors inflation data on the signs of high inflation as a result of the Trump administration’s definitions because it prevents potential interest rate discounts as soon as it meets the next monetary policy in mid -September.

Federal Reserve Chair Jerome Powell The door opened to a possible rate in his speech at the annual conference of the Central Bank in Jackson Hall last week, noting that the labor market is “a kind of strange balance that results from a noticeable slowdown in both supply and demand for workers.”

While he pointed out that the negative risks to work are increasing, the risk of ascension is still a challenge. Powell explained that “the effects of definitions on consumer prices are now clear,” explaining that there is uncertainty about whether these price increases “are likely to” raise financially to the continuous inflation problem. ”

Powell said that although it is possible that the high prices resulting from the customs tariffs are short -term and represented a single -time shift in the price level, the upward pressure on the prices of customs tariffs can create a more permanent hypertrophy.

Producers prices rose more than expected in July, which raised inflation fears

Federal policy makers weigh the risks on both sides of their double mandate to enhance the maximum employment and stable prices in line with the long -term inflation goal of the central bank.

the July Jobs report weak The expectations were strengthened to reduce the September rate in the eyes of the market, while the fresh labor market data will come out next week.

“The Federal Reserve has opened the door to evaluate the discounts, but the size of this opening will depend on whether the labor market is still a bigger risk of high inflation,” said Ellen Zintner, the chief economic strategy of the Morgan Stanley Wealth Management. “The PCE price index will maintain the line today to focus on the job market. At the present time, the possibilities still prefer to reduce September.”

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“Good news” is that PCE inflation is in line with expectations, “it is possible that it will maintain the current situation, which leaves a feeding rate in September.

“Inflation has increased in all fields, as both goods and services rise up. While the Federal Reserve is likely to reduce prices to accommodate the labor market, it may be difficult for them to move quickly or strongly as they want to move inflation to the top.”

The market has seen the PCE inflation report that it slightly increases the chances of reducing the September rate from the target range of current federal funds of 4.25 % to 4.5 %. The probability of reducing 25-Basis from 86.7 % per day increased to 87.2 % on Friday after the release, according to the CME Fedwatch tool.