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Core PCE Price Index Falls in Line with Expectations

Key Sections

The Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, came in as expected at 0.2% for the month of June. This aligns with expectations and suggests a continued moderation in price pressures. 

While the Core PCE is less frequently discussed than the Consumer Price Index (CPI), it holds greater significance for policymakers. This is due to its focus on consumer spending patterns and its use of a chain-weighted methodology, which is considered to be a more accurate reflection of price changes. 

Impact on the Economy and Markets 

The steady Core PCE reading reinforces expectations of a potential pause in interest rate hikes by the Federal Reserve. Market sentiment has shifted dramatically since the June CPI report, with the likelihood of a rate cut now at 95.9%, a 5% increase from just weeks ago. While this suggests a growing expectation for monetary easing, inflation remains above the Fed’s 2% target, leaving the central bank’s path uncertain. As a result, investors will closely monitor upcoming economic indicators for clues about the Fed’s next move. 

Breaking Down the Numbers 
  • Core PCE: Increased 2.5% from a year ago and 0.1% month-over-month  
  • Goods prices: Decreased 0.2% month-over-month. 
  • Services prices: Increased 0.2% month-over-month. 
  • Housing-related prices: Rose 0.3% month-over-month, a slight slowdown. 
  • Personal income: Increased 0.2%, below estimates. 
  • Savings rate: Decreased to 3.4%, the lowest since November 2022. 
Impact on the Economy and Markets 

A cooling inflation rate is generally positive news for consumers and businesses. Lower prices can boost consumer spending power, benefiting companies in consumer-oriented sectors. Additionally, it can ease pressure on corporate profit margins. 

Stock market futures rose following the report, indicating investor optimism. Treasury yields declined as expectations for rate cuts increased. 

Looking Ahead 

While the Core PCE reading offers some relief, it’s essential to consider the broader economic landscape. Factors such as geopolitical tensions, supply chain disruptions, and labor market conditions can influence inflation trends. Investors should maintain a balanced perspective and consider diversifying their portfolios to manage potential risks. 

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  1. Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. The information provided in this article is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you.

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