The Dow Jones (DJIA) is set to open Friday’s trading session in negative territory as inflation remains persistent amid a high-tariff economic environment.
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July’s personal consumption expenditures (PCE) index, or the Fed’s preferred gauge of inflation, rose 0.3% month-over-month and 2.6% year-over-year. Both figures were in line with their estimates. However, core PCE, which excludes volatile food and energy prices, increased by 0.2% month-over-month and 2.9% year-over-year. While both readings were also in line with their estimates, core PCE rose at the highest annual pace since February.
Fed Must Balance Inflation and the Labor Market
PCE measures the prices that consumers pay for goods and services. While annualized core PCE accelerated from 2.8% in June, the odds of a 25 bps rate cut at the September 16-17 Federal Open Market Committee moved to 87.1% compared to 86.7% a day ago, according to CME’s FedWatch tool.
Although inflation remains a risk, the Fed must also address the labor market, which has shown signs of weakness in recent months as companies are hesitant to both hire and fire employees.
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