July PCE data lands two days before Fed Chair Warsh's first Jackson Hole keynote. Core inflation expected at 0.18% month on month, with the annual rate seen holding near 3.2%. A hotter or softer print could reshape the rate path narrative.
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The Bureau of Economic Analysis releases its Personal Income and Outlays report for July today at 8:30 a.m. Eastern, delivering the Federal Reserve's preferred inflation gauge two days before Chair Kevin Warsh's first Jackson Hole keynote. The timing makes this a genuinely stacked stretch for US macro risk.
Consensus forecasts compiled by FactSet see headline PCE inflation rising 0.07% on the month, a rebound from June's 0.11% decline that was the first negative monthly PCE reading since 2020. On an annual basis, headline inflation is expected to ease to 3.6% from 3.7%. Core PCE, which strips out volatile food and energy prices, is forecast to rise 0.18% month on month. Economists are divided over whether the year-on-year rate holds at 3.3% or eases to 3.2%.
The July CPI report already published, and Continuum Economics expects the PCE data to mirror it closely, forecasting headline inflation at 0.1% and core at 0.2% month on month, which would take the annual core rate down to 3.2% from June's 3.3%, the firm said. Natixis chief US economist Christopher Hodge takes a firmer view, forecasting headline PCE unchanged at 3.70% year on year, and noting that while broader tariff-related price pressure fades, computer hardware and software prices tied to the AI and data centre investment boom continue to add to core inflation readings.
The data follows last week's release of the July FOMC minutes, which revealed broader support for a rate hike than the formal 9-3 vote suggested, and this week's discount rate minutes, showing four of the Fed's twelve regional bank boards had favoured tightening ahead of that same meeting.
A softer-than-forecast core reading would likely support equities, particularly growth and technology stocks, while weighing on the dollar and lifting gold, consistent with reduced pressure for further tightening, traders said. A hotter-than-expected print would push Treasury yields higher, pressure growth stocks and strengthen the dollar, while reinforcing the hawkish case that has already produced unusual dissent within the Fed's ranks this cycle.
Independent forecasters broadly align with the consensus picture, though with some divergence in emphasis. The print is one of the last major data points available before Warsh delivers his first Jackson Hole keynote as chair on Friday, an appearance being watched for signals on whether the Fed leans toward holding rates, resuming cuts, or shifting back toward tightening.
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