PCE diffusion index .. Warsh’s new pet rock.
No evidence of 2nd and 3rd order effects of the Oil Shock.
But then again when has the Fed focused on Theory and Facts?
PCE inflation was still elevated at 3.7% last month, almost double the Fed's target.
Tariffs and in particular the unresolved Iran War continue to take their toll.
PCE SUPPORTS FED HOLD FOR NOW
Capital Economics says July’s core PCE increase is unlikely to trigger a Fed rate hike in September.
However, with annual core inflation at 3.3% and economic growth remaining resilient, the firm believes higher rates may eventually be necessary.
For now, the data strengthen the case for the Fed to hold rates steady.
PCE INFLATION SEEN AT 3.6% IN JULY
Oxford Economics expects the Fed’s preferred inflation gauge, headline PCE, to rise 3.6% year-over-year in July, easing slightly from 3.7% in June.
The report is due later this month.
With services inflation cooling and the labor market showing little sign of overheating, Oxford Economics expects the Fed to keep rates unchanged for the rest of 2026.
US PCE inflation rose to 3.6% year on year in September while Q3 GDP grew 3.4% against 3.2% expected, and CME FedWatch puts December Fed hike odds at 79.6%, a factor for $BTC.
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