PCE inflation in the USA: what to expect from the report?

The Personal Consumption Expenditure Index (PCE), which the US Federal Reserve (Fed) uses as the main indicator of inflation, is likely to confirm a slowdown in price growth, although it will remain above the target level of 2%.

According to economists, the August report, which will be released on Friday, will show an increase in the main PCE index by 0.1%, and the base index, excluding volatile food and energy prices, by 0.2%. These data will be close to 2% annual inflation in the United States. Experts note that inflation is moving towards the Fed's goal, despite possible temporary deviations.

The annual growth of the PCE indicator is expected to decrease to 2.3% from the previous 2.5%, reaching the lowest level since the beginning of 2021. Some experts predict that inflation may return to the Fed's target level as early as January or February 2024.

There is a possibility that the core PCE index will increase from 2.6% to 2.7%, due to rising housing prices. However, the markets may perceive this as a temporary phenomenon, given the signs of a cooling rental market. In general, confirmation of a slowdown in inflation will support the Fed's policy of easing monetary policy and may contribute to the growth of Wall Street indices, while putting pressure on the dollar.