SEPTEMBER 3, 2024 – SEPTEMBER RATE CUT A NEAR CERTAINTY
The Commerce Department released the personal consumption expenditures price index (PCE) on Friday, which showed inflation edged up slightly in July by 0.2 percent for the month and is up 2.5 percent from a year ago. The PCE is the Fed’s preferred inflation measure and is seen as a better gauge of long-term inflation trends. In the same report it was noted personal income increased 0.3 percent, slightly above expectations, and consumer spending rose 0.5 percent, in line with the forecast.
Fed Chair Powell has expressed confidence inflation is trending to the 2 percent target. The focus will now be shifting towards the labor market. Unemployment remains low at 4.3 percent, but the feeling is hiring is slowing and there has been a number of layoffs in the recent weeks.
The Fed meets September 17-18, with the markets pricing in a 100 percent chance of a rate cut. The consensus is for a 25 basis point cut, unless this week’s jobs report is really weak. The Fed can adjust rates further at its November and December meetings.