Odaily News The United States will release the Federal Reserve's favorite inflation indicator tonight - the personal consumption expenditure price index (PCE). The market expects that the PCE price index in April will increase by only 0.1% month-on-month, and the year-on-year growth rate will drop from 2.3% to 2.2%, approaching the level before the COVID-19 pandemic. In terms of core, the core PCE, which excludes fluctuations in food and energy prices, is expected to grow by 0.1% month-on-month, but the year-on-year growth rate will remain at a high level of 2.6%.
Currently, PCE matters because the Fed prefers to use it to measure the underlying trend of inflation.
Analysts pointed out that the inflationary effects of the Trump administration's tariffs have just begun to penetrate the U.S. economy. Most economists predict that even if Trump relaxes some tariffs, inflation may still rebound to 3% in a few months.
With the US core PCE stuck in the 2.8%-2.6% range for six consecutive months, the Fed's window for rate cuts is closing. Although some Fed officials remain positive about rate cuts, the interest rate futures market shows that traders' forecasts for the probability of a rate cut in September have dropped sharply from 68% a week ago to 47%. They also expect the US economy to be at the crossroads of a new inflation cycle. (Jinshi)