The US Commerce Department released the Personal Consumption Expenditures (PCE) price index for July. The overall PCE index rose 0.2% month-over-month and 3.7% year-over-year, slightly above the Dow Jones survey. Meanwhile, the core PCE index, which excludes food and energy, rose 0.2% month-over-month and 3.3% year-over-year, in line with analyst expectations. American incomes rose 0.4% and personal spending rose 0.2%, both better than market forecasts. Goods prices fell 0.1% due to a 2.7% drop in gasoline and energy prices, while services prices rose 0.3%, driven by a 1.2% increase in financial and insurance services and a 0.3% rise in housing. The PCE index is a key inflation gauge closely watched by the Federal Reserve, with inflation still significantly above the 2% target. The Federal Open Market Committee (FOMC) is scheduled to meet on September 15-16, with markets pricing in only a one-in-three chance of a rate hike at this meeting and seeing the highest probability of a hike in December. Meanwhile, the Bureau of Economic Analysis (BEA) kept its second-quarter GDP estimate at 1.5% annualized but raised its consumer spending estimate to 3.4% from 3.2%, reflecting that household consumption, which accounts for about two-thirds of economic activity, remains strong.
