The Federal Reserve sends a clear signal of interest rate cuts, with economic data this week expected to support policy adjustments
The Federal Reserve hints at an upcoming rate cut, with the market focusing on the upcoming July PCE inflation index and personal spending data. These data are expected to show the resilience of the U.S. economy and potential inflationary pressures. Economists predict that the U.S. core PCE inflation index will rise by 0.2% for the second consecutive month, while personal spending will increase by 0.5% on a month-on-month basis. Federal Reserve Chairman Powell mentioned inflation improvement in the previous meeting and indicated that the time for policy adjustments has come. There are several important economic data releases scheduled for the upcoming week
According to the Zhitong Finance and Economics APP, the US July PCE Price Index data to be released this Friday is expected to further indicate that the long-awaited rate cut is imminent. Meanwhile, the US July Personal Spending Rate to be released on the same day seems to indicate that the Federal Reserve has successfully maintained the momentum of economic expansion.
Economists predict that the Core PCE Price Index, a key measure of potential inflation favored by the Federal Reserve, will rise by 0.2% for the second consecutive month in July, bringing the three-month core inflation annual rate down to 2.1%, slightly above the Fed's 2% target.
Potential inflation in the United States is declining
Economists also predict that US personal spending in July will rise by 0.5% month-on-month, marking the largest increase in four months. As consumer spending is a key driver of US economic growth, this data is expected to show the resilience of the US economic expansion.
At last week's Jackson Hole central bank symposium, Federal Reserve Chairman Powell acknowledged recent progress in inflation. Powell stated that he is confident that inflation is returning to the 2% track, "the time for policy adjustment has come," and the Fed "neither seeks nor welcomes further cooling of the labor market."
Powell's remarks mark a key turning point in the Fed's two-year battle against inflation and highlight its shift in focus to labor market risks - another part of the Fed's dual mandate, as employment growth helps sustain consumer spending, which is crucial to ensuring economic expansion.
In addition to the above two major data releases, economic data to be released in the coming week include: the preliminary value of US July Durable Goods Orders on Monday, the US August Conference Board Consumer Confidence Index on Tuesday, the revised annualized quarterly rate of US Q2 GDP on Thursday, and the final value of the University of Michigan Consumer Confidence Index for August on Friday.
In terms of Fed officials' speeches, Daly, President of the Federal Reserve Bank of San Francisco and a voting member of the Federal Open Market Committee (FOMC) in 2024, will speak on Monday, while Bostic, President of the Federal Reserve Bank of Atlanta, will speak on Wednesday about the economic outlook.
Economists like Anna Wong commented, "Powell's dovish speech at the Jackson Hole symposium was music to the ears of market participants. He pledged that the Fed will do everything it can to support a strong labor market to provide support for the economy. We believe that a reality check is necessary."