The June PCE is coming tonight! Will it trigger a rate cut by the Federal Reserve?

According to the Wise Finance APP, the inflation indicator favored by the Federal Reserve is expected to confirm that inflation is continuing towards the 2% target. The June Personal Consumption Expenditures Price Index (PCE) will be announced on Friday evening at 20:30, providing another key evidence for a rate cut in September.

Data from FactSet shows that economists generally predict a 0.1% month-on-month increase in the overall PCE price index for June, with a year-on-year increase of 2.4%. Previously, the month-on-month growth rate of the PCE price index in May was almost unchanged, with monthly increases of 0.3% in February, March, and April, and a year-on-year increase of 2.6% in May.

Economists expect the core PCE price index for June (excluding food and energy components) to increase by 0.2% month-on-month and by 2.5% year-on-year. The core PCE price index rose by 0.1% in May, with a year-on-year increase of 2.6%.

The June core PCE price index is expected to increase slightly below 0.2% month-on-month, with a year-on-year increase reaching 2.5%, marking the progress the Federal Reserve has made in curbing inflation since 2022, when the PCE price index peaked at over 7%.

The second-quarter U.S. Gross Domestic Product (GDP) released on Thursday exceeded expectations and included an annualized growth rate of quarterly inflation data, providing a forward-looking view for Friday's data. The annualized growth rate of the core PCE price index in the second quarter was 2.9%, lower than the previous 3.7%, while economists had previously expected an annualized growth rate of 2.7%.

However, this unexpected growth may not only be attributed to the intensification of inflation in June, as data from April or May may be revised higher.

Stephen Stanley, Chief U.S. Economist at Santander Bank's U.S. Capital Markets, wrote on Thursday, "The extreme and unrealistic scenario is that if the data for April and May are not revised, the data for June will rise by 0.3%." Instead, he believes that the June PCE price index is more likely to rise by 0.2%, with a slight upward revision for May.

On July 11, the U.S. Bureau of Labor Statistics released another inflation measure, the Consumer Price Index (CPI). The data shows that housing prices fell by 0.1% in June, with a year-on-year increase of 3%; the core CPI rose by 0.1% month-on-month, with a year-on-year increase of 3.3%.

Federal Reserve officials stated that data from the past few months indicate a slowdown in the pace of inflation after a rocky start in 2024, which is encouraging to them. Since July 2023, the Federal Open Market Committee (FOMC) has maintained the federal funds rate target in the range of 5.25% - 5.5%.

Futures market pricing on Thursday implies a high likelihood of a 25 basis point cut at the September meeting by the committee. The unremarkable June Personal Consumption Expenditures Price Index will only further increase this certainty