Get ready for a major Fed inflation report this Friday – What you need to know!

Hot summer days in Brooklyn, New York often call for a refreshing drink from the local store. As people browse through the aisles, little do they know that the upcoming economic report from the Commerce Department may bring some positive news on inflation.

Here are some key highlights to look out for in the upcoming report:

• The personal consumption expenditures price index, a significant measure used by the Federal Reserve to gauge inflation, is anticipated to show minimal to no monthly increase for May – a first since November 2023.
• The core PCE price index, which excludes volatile food and energy prices and is closely watched by Fed policymakers, is expected to display its lowest annual reading since March 2021. This date marked the initial breach of the Fed’s 2% inflation target during the current cycle.
• Analysts project that the headline PCE price index will remain flat month-over-month, while the core index is predicted to rise by 0.1%. Year-over-year, both headline and core indexes are forecast at 2.6%.

Beth Ann Bovino, chief economist at U.S. Bank, commented, “We expect the PCE core pricing data to come in soft. That’s positive news for the Fed, and ultimately for consumers. However, the impact may not be felt immediately.”

While inflation rates have declined from their peak in mid-2022, prices have continued to rise steadily. Since March 2021, the core PCE index has surged by 14%, emphasizing the ongoing challenge faced by the Federal Reserve to reach its 2% target.

Federal Reserve Governor Lisa Cook emphasized that the process of sustaining inflation at the desired level is ongoing and not yet accomplished. Despite progress made since the initiation of rate hikes in March 2022, Fed officials remain cautious.

Looking ahead, market expectations hint towards potential rate cuts in the latter part of the year. Futures markets suggest the likelihood of a quarter percentage point cut in September, with another cut anticipated by year-end. The Fed’s decision will heavily rely on incoming data.

Apart from inflation figures, the Commerce Department will also release data on personal income and consumer spending. Projections stand at 0.4% and 0.3%, respectively.

Stay tuned for further updates and insights as the economic landscape continues to evolve.