The Fed’s favorite inflation gauge is big market hurdle of next week
The Federal Reserve’s favorite inflation gauge is set to be a major market hurdle next week.
The Fed’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) index, is due out on Friday. The index is expected to show that inflation rose 2.4% in the 12 months through May, up from 2.3% in April.
The index, which is closely watched by the Fed, has been running below the central bank’s 2% target for the past several years. The Fed has been reluctant to raise rates until inflation rises back to its target.
The PCE index is seen as a better gauge of inflation than the Consumer Price Index (CPI), which is more widely used. The CPI rose 2.8% in the 12 months through May, up from 2.5% in April.
The PCE index is more closely aligned with the Fed’s economic outlook, as it takes into account changes in consumer spending habits and the cost of goods and services. The CPI, on the other hand, is more of a snapshot of prices at a given moment.
The release of the PCE index could be a major market mover next week, as investors look for clues about the Fed’s next move. If the index shows that inflation is picking up, it could be a sign that the Fed is ready to raise rates. If inflation remains below the Fed’s target, it could signal that the central bank is in no rush to raise rates.
Either way, the PCE index will be a major market hurdle next week. Investors will be closely watching to see how the index fares and what it means for the Fed’s future rate decisions.