The Fed's favorite inflation indicator remains unchanged from the previous value, with no impact on the prospect of interest rate cuts

The data on Friday showed that the Federal Reserve's preferred inflation gauge rose at a moderate pace in July, with household spending remaining stable. This indicates that policymakers have been able to restrain price pressures without causing too much pain to consumers, achieving a soft landing, thereby weakening the need for a 50 basis point rate cut by the Federal Reserve in September.

The US core PCE price index for July recorded an annual rate of 2.6%, unchanged from the previous month and slightly lower than the market expectation of 2.7%; the monthly rate remained at 0.2%, in line with expectations. The US PCE price index for July recorded an annual rate of 2.5%, lower than the expected 2.6% and unchanged from the previous value of 2.5%; the monthly rate increased from 0.1% in the previous month to 0.2%, in line with expectations. US personal spending for July increased as expected from 0.3% in the previous month to 0.5%.

After the PCE data was released, spot gold prices fell by $6 in the short term, while the US dollar index rose by 16 points. US short-term interest rate futures edged lower. US stock index futures edged higher.

Analysts stated that overall, US personal income and spending data are positive, with income and real spending slightly better than expected. The overall price index is in line with expectations, while the year-on-year change in core prices is slightly lower than economists' forecasts. The monthly super-core service sector inflation rate was 0.21%, similar to May and June.

The analyst believes that overall, nothing is stopping the Federal Reserve from cutting rates next month... but for the same reason, there is also no evidence to suggest a 50 basis point rate cut is warranted. Therefore, these data may not cause significant fluctuations as the end of the month approaches (along with the release of employment data a week later).

US consumer spending grew steadily in July, indicating that the economy remained on a solid footing at the beginning of the third quarter, which does not support the argument for a significant rate cut by the Federal Reserve next month as some believe.

Following the jump in the unemployment rate to a near three-year high of 4.3% in July, concerns about the health of the US economy have arisen, sparking calls for a 50 basis point rate cut by the Federal Reserve in September. However, policymakers also noted that the slowdown in the labor market was mainly due to reduced hiring rather than layoffs.

Most economists still believe that the Federal Reserve will reject a 50 basis point rate cut, as the economy continues to show strong growth, and although inflation has slowed significantly, it remains above the 2% target.

Vanguard's Chief Economist Joe Davis expects that the July PCE data will not alter the Federal Reserve's expected rate cut trajectory. He believes that the Federal Reserve will cut rates by 25 basis points at the meetings in September and December this year.

Federal Reserve Chairman Powell stated last week that the time has come for the Federal Reserve to lower key policy rates. He affirmed the expectation among Federal Reserve officials that they will begin lowering borrowing costs next month and explicitly stated his intention to prevent further cooling of the labor market ING analyst Francesco Pesole pointed out that as the market is confident in the Fed's loose policy, the majority of the US dollar's decline may have already occurred. In addition, the upcoming Labor Day holiday in the United States next Monday may also be favorable for range trading on Friday