The US Core Personal Consumption Expenditures (PCE) price index is a key economic indicator that measures the average change in prices paid by consumers for goods and services, excluding volatile food and energy prices. It is considered the Federal Reserve’s preferred inflation gauge, and its release is closely watched by investors, policymakers, and economists alike.
On Friday, July 30th, the Bureau of Economic Analysis will release its latest report on the US Core PCE for June 2021. Banks and financial institutions have already made their predictions and expectations for this report, and many are anticipating persistently high inflation levels.
According to a survey conducted by Bloomberg, economists predict that the US Core PCE will rise by 0.6% in June, which would bring the year-over-year increase to 3.7%. This would mark the highest annual inflation rate since 1991, when the US was recovering from a recession.
The persistently high inflation levels have been a cause for concern among policymakers and investors, as it could lead to a decrease in purchasing power and a rise in interest rates. The Federal Reserve has maintained that the current inflation surge is transitory and will eventually subside as supply chain disruptions and other pandemic-related factors ease.
However, some analysts argue that the Fed’s stance may be too optimistic, given the recent surge in prices across various sectors of the economy. For instance, the housing market has seen a sharp increase in prices due to low inventory levels and high demand. The cost of lumber has also skyrocketed, leading to higher prices for new homes and renovations.
Moreover, the labor market has been experiencing a shortage of workers, which has led to higher wages and increased production costs. These factors could lead to a persistent increase in prices, which could be difficult to reverse.
In light of these concerns, some banks have revised their inflation forecasts for the year. Goldman Sachs now predicts that the US Core PCE will rise by 3.6% in 2021, up from its previous estimate of 3.2%. JPMorgan Chase also revised its forecast to 3.7%, up from 3.3%.
The release of the US Core PCE report on Friday will provide further insight into the state of inflation in the US economy. If the inflation levels continue to rise, it could prompt the Fed to reconsider its monetary policy and potentially raise interest rates sooner than expected.
In conclusion, the US Core PCE report for June is expected to show persistently high inflation levels, which could have significant implications for the economy and monetary policy. Investors and policymakers will be closely watching the report’s release and its impact on the markets.
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