Analysis: US PCE Index to be Released Tonight, Fed's Rate Cut Window May Be Closing

Odaily Planet Daily News: The United States will release the Federal Reserve's preferred inflation indicator tonight—the Personal Consumption Expenditures Price Index (PCE). The market expects the PCE price index for April to increase by only 0.1% month-on-month, with the year-on-year growth rate dropping from 2.3% to 2.2%, approaching pre-COVID-19 levels. On the core side, excluding food and energy price fluctuations, the core PCE month-on-month growth rate is expected to be 0.1%, but the year-on-year growth rate will remain at a high level of 2.6%.
Currently, the importance of PCE lies in the Federal Reserve's preference for using it to measure underlying inflation trends.
Analysts point out that the inflationary effects of the tariffs imposed by the Trump administration are just beginning to permeate the U.S. economy. Most economists predict that even if Trump eases some tariffs, inflation may rebound to 3% in a few months.
As the U.S. core PCE has been stuck in the 2.8%-2.6% range for six consecutive months, the Federal Reserve's window for rate cuts is closing. Although some Federal Reserve officials remain positive about rate cuts, the interest rate futures market shows that traders' predictions for a rate cut in September have plummeted from 68% a week ago to 47%. They also anticipate that the U.S. economy is at the crossroads of a new inflation cycle. (Jin10)