{"id":4912,"date":"2024-07-26T10:00:56","date_gmt":"2024-07-26T10:00:56","guid":{"rendered":"https:\/\/alchemymarkets.com\/?post_type=market_insights&p=4912"},"modified":"2025-05-14T09:53:39","modified_gmt":"2025-05-14T09:53:39","slug":"pce-july-2024","status":"publish","type":"market_insights","link":"https:\/\/alchemymarkets.com\/sv\/education\/market-insights\/opening-bell\/pce-july-2024\/","title":{"rendered":"Sticky Inflation? U.S. Core PCE Data Expected to Be Higher"},"content":{"rendered":"\n

The Federal Reserve\u2019s key measure for assessing inflation, the Core PCE index, will have its month-over-month data released shortly. As we approach this crucial release, it\u2019s advisable to exercise caution in trading, as unexpected results could cause market volatility.<\/p>\n\n\n\n

The current projection for the Core PCE index is a 0.2% increase, slightly up from the 0.1% reported in June. So, should investors be worried about this reading? Does it imply that inflation is still sticky?<\/p>\n\n\n\n

Markets Volatility Expected To Be Mute, Unless There is a Surprise Reading<\/h2>\n\n\n\n

The markets have likely already factored in the expected Core PCE data, so significant volatility may not occur with a 0.2% reading.<\/p>\n\n\n\n

However, if the actual data deviates significantly\u2014such as a reading of 0.3% or 0.0%\u2014it could trigger unexpected market reactions. A higher-than-expected reading could indicate more persistent inflationary pressures, potentially affecting the Federal Reserve’s policy outlook, while a lower-than-expected reading could suggest inflation is cooling more than anticipated.<\/p>\n\n\n\n

In either case, a surprise outcome could lead to increased market volatility as investors adjust their expectations.<\/p>\n\n\n\n

Announcement<\/strong><\/td>Previous<\/strong><\/td>Forecast<\/strong><\/td><\/tr>
Core PCE Index m.m<\/td>0.1%<\/td>0.2%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Inflation has Been Steadily Slowing Down<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Source: ForexFactory, Alchemy Markets<\/p>\n\n\n\n

Despite the expected uptick in the Core PCE m\/m data, the overall trend since February 2024 has shown a progression in slowing inflation. This suggests that investors are anticipating a steady inflation trend, which should not cause major shifts in market sentiment barring any unexpected data surprises.<\/p>\n\n\n\n

0.3% Reading Would Be Dangerous<\/h2>\n\n\n\n

The FedWatch Tool currently indicates a 100% expectation for at least a 25 basis points (bps) rate cut by the Federal Reserve in September. Additionally, 11.9% of market participants expect a 50 bps cut, while a smaller 0.4% anticipate a larger cut of 75 bps.<\/p>\n\n\n\n

This overwhelming expectation for rate cuts reflects market exuberance, with investors heavily betting on easing monetary policy. However, a surprise Core PCE reading of 0.3% or higher could significantly disrupt these expectations, triggering a notable market reaction as it would cast doubt on the likelihood of imminent rate cuts and suggest stronger inflationary pressures than anticipated.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Source: CME Group<\/p>\n\n\n\n

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Closing Thoughts<\/h2>\n\n\n\n

Although the markets are expected to remain relatively calm following the Core PCE data release, it’s crucial to exercise good risk management in your trades. A surprise reading could unsettle investors and lead to unexpected market reactions.<\/p>\n\n\n\n

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Data Release Time<\/h2>\n\n\n\n