The Federal Reserve’s preferred inflation reading for August will be released on Friday, along with other data. If the inflation data comes in higher than expected, it could fuel expectations that the Fed’s rate hike cycle is not yet over and may act as a headwind for risk assets. Conversely, if the data is below expectations, it could suggest that the Fed’s rate hike cycle is ending.
The consensus for the Core PCE Price indexes is for a year-on-year increase of 3.9% and a month-on-month increase of 0.2%. However, the ranges for these indexes are wider, with a year-on-year range of 3.7% to 4.2% and a month-on-month range of 0.0% to 0.3%. While results that deviate from the consensus are more likely to prompt a market reaction, results that fall below the minimum or exceed the maximum range will have an even greater impact.
Overall, the release of the inflation data will be closely watched by investors and market participants, as it will provide insights into the trajectory of inflation and the potential actions of the Federal Reserve. Depending on whether the data is higher or lower than expected, it could influence expectations for future interest rate hikes and impact the performance of risk assets.
