The Dow Jones (DJIA) is set to open Thursday’s trading session in green territory, brushing off a higher-than-expected inflation reading.
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The core personal consumption expenditures (PCE) index, which is the Fed’s preferred gauge of inflation, increased by 0.3% month-over-month and 2.8% year-over-year. The monthly rise was in line with the consensus estimate, although economists were expecting an annual rise of 2.7%. Core PCE increased by 0.2% month-over-month and 2.8% year-over-year in May. The core PCE index excludes food and energy prices from the PCE index given their volatility.
Rate Cut Odds Plummet Following PCE Reading
The Personal Consumption Expenditures (PCE) index in June increased by 0.3% month-over-month and 2.6% year-over-year. Economists were expecting growth of 0.3% and 2.5%, respectively.
With higher inflation, the Fed is less incentivized to cut rates because higher rates help to lower inflation. The odds of a 25-bps cut at the September 16-17 Federal Open Market Committee (FOMC) meeting now stand at 39.2% compared to 46.7% yesterday and 58.4% a week ago, according to CME’s FedWatch tool.
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