U.S. June PCE Sees First MoM Drop in Four Years, Fueling Market Uncertainty Over Fed's Future Policy Path

BlockBeats News, July 31st. In June, the US PCE Price Index fell by 0.1% month-over-month, marking the first monthly decline in four years, with a year-over-year growth rate of 3.7%; the core PCE rose by 0.1% month-over-month, with a year-over-year rate of 3.3%, both indicating a slight easing of inflationary pressures. During the same period, personal consumption expenditures in the US increased by 0.3% month-over-month, personal income grew by 0.2%, and the savings rate dropped to 2.7%, hitting a four-year low.

Despite the slight cooling of inflation, the Federal Reserve kept interest rates unchanged at the July meeting. There is a clear discrepancy in the market's expectations for the future policy path: JPMorgan Chase expects the Fed to raise rates by 25 basis points in December and believes that if inflation continues to rise, a rate hike in September is still possible; Goldman Sachs and Barclays expect the Fed to hold steady for the rest of the year, Bank of America anticipates three rate hikes starting in September, while Citigroup still maintains expectations of rate cuts in October, December, and January 2027.

CME FedWatch data shows that the market is pricing in a 65.2% probability of a rate hike in September, a slight decrease from before the interest rate decision was announced.