According to the WiseNews app, the inflation index favored by the Fed is expected to confirm that inflation continues to move towards the 2% target. The June Personal Consumption Expenditures Price Index (PCE) will be released on Friday evening at 20:30 and may provide further key evidence for the September rate cut.

Data from FactSet shows that economists generally predict that the overall PCE price index for June will increase by 0.1% month-on-month and 2.4% year-on-year. Prior to this, the monthly growth rate of the May PCE price index was almost unchanged, with monthly increases of 0.3% in April, May, and June, and a year-on-year increase of 2.6% for May PCE price index.

Economists predict that the core PCE price index for June (excluding food and energy components) will increase by 0.2% month-on-month and 2.5% year-on-year. The core PCE price index for May increased by 0.1% month-on-month and 2.6% year-on-year.

The June core PCE price index is expected to rise slightly less than 0.2%, or reach a year-on-year increase of 2.5%, marking progress by the Fed in curbing inflation since 2022 when the PCE price index peaked at an increase of over 7%.

The second quarter US gross domestic product (GDP) released on Thursday exceeded expectations and included an annualized growth rate of inflation data for the quarter, providing forward-looking data for Friday. The annualized growth rate of the core PCE price index for the second quarter was 2.9%, lower than the previous value of 3.7%, and economists had previously predicted an annualized growth rate of 2.7%.

However, this unexpected growth may not only be attributed to the acceleration of inflation in June, as data from April or May may be revised upwards.

Stephen Stanley, chief US economist for US capital markets at Banco Santander, wrote on Thursday, "The extreme and unrealistic scenario is that if the data from April and May are not revised, the data from June will rise by 0.3%." Instead, he believes that the June PCE price index may rise by 0.2%, and the data from May may be slightly revised upwards.

On July 11, the US Bureau of Labor Statistics released the Consumer Price Index (CPI) as another measure of inflation. The data showed that house prices fell by 0.1% in June and rose by 3% year-on-year; the core CPI rose by 0.1% month-on-month and 3.3% year-on-year.

Federal Reserve officials have said that recent data shows that inflation has slowed down after a rough start in 2024, which has encouraged them. Since July 2023, the Federal Open Market Committee (FOMC) has maintained the federal funds rate target within the range of 5.25% to 5.5%.

On Thursday, the futures market implied a high probability of the committee lowering the 25 basis points at the September meeting. The plain June personal consumption expenditure price index will only add to this certainty.