The Federal Reserve's preferred PCE inflation barometer is primed to show just a very small increase in prices in June, based on the details of the consumer and producer price indexes.
The PCE is what the Fed uses as its inflation guidepost when it decides to change interest rates.
The so-called core PCE, which omits food and energy, is likely to rise between 0.1% and 0.2% in June, economists say. Before the PPI report, the consensus forecast appeared to around 0.2%.
How come? Some of the categories in the PPI that feed into the PCE such as medical car and financial advice showed smaller increases in prices than expected.
If the updated forecasts are right, the 12-month increase in PCE inflation could slow to 2.5% from 2.6% and nudge the rate closer to the Fed's 2% target.
Fed Chairman Jerome Powell has made it clear the Fed won't wait until inflation meets the central bank's goal before cutting interest rates.
Wall Street investors are betting the Fed in September will cut rates for the first time since the pandemic.
"September rate cut on the way – and we can’t completely rule out a surprise move in July," said Paul Ashworth, chief North America economist at Capital Economics.
https://www.marketwatch.com/livecoverage/ppi-report-for-june-wholesale-inflation-data-eyed-after-cpi-surprise/?mod=home-page