U.S. core PCE slightly exceeded expectations in June, market expectations for interest rate cuts remain stable

On Friday, the Federal Reserve's favorite inflation gauge showed a moderate increase in inflation in June, with consumer spending remaining healthy. This is an encouraging sign for officials who hope to cool inflation without damaging the economy, supporting expectations that the Fed will begin cutting interest rates in September.

In the United States, the year-on-year growth rate of the PCE price index for June fell from 2.6% in the previous month to 2.5%, with a slight rebound in the month-on-month growth rate to 0.1%, both in line with expectations. As for core indicators, the year-on-year PCE price index for June came in at 2.6%, higher than the expected 2.5% and consistent with the previous value. The US core PCE price index for June recorded a monthly rate of 0.2%, also higher than the expected 0.1% and unchanged from the previous month. Personal spending in the US for June recorded a monthly rate of 0.3%, in line with expectations, with the previous value revised up from 0.2% to 0.4%.

US short-term interest rate futures rose slightly after the inflation data was released. Traders expect the Fed to keep rates unchanged in July and start cutting rates in September. The US dollar index fell by 20 points in the short term. Spot gold once approached the intraday high.

Overall, US prices rose moderately in June, highlighting an improved inflation environment, which may help boost confidence among Fed officials meeting next week that inflation is moving towards the 2% target and prepare for rate cuts starting in September.

Analyst Cameron Crise stated that the US PCE price index roughly met expectations, but as mentioned earlier, after some adjustments, the year-on-year change in core data was slightly higher than expected. Considering the market's general forecasts, the new level of the core index is also slightly higher than expected. Excluding housing, core service expenditure data did not rise as mildly as the corresponding data in the CPI report, increasing by 0.19% month-on-month. The corresponding data from the previous month was revised up from 0.1% to 0.18%.

He pointed out that these data are not enough to prevent the Fed from cutting rates in September, but there is also no indication that the Fed needs to cut rates early or by more than 25 basis points. The bond market may be reacting to weaker income/spending data, as inflation data does not seem sufficient to support any rebound.

Meanwhile, consumer spending in June grew moderately by 0.3%, helping the US economy continue to expand at an above-average pace. Spending in May and April was also revised up, indicating a healthier level of consumer spending.

After cutting spending in the first three months of the year, households increased spending from April to June. Gross Domestic Product (GDP) data shows that after consumer spending grew by 1.5% in the first quarter, the annual growth rate in the second quarter was 2.3%.

However, some economists question how long consumers can maintain their current spending levels with small income growth and low savings rates. They predict that spending will slow down in the coming months, leading to weak economic growth in the United States Continuously updating