The Federal Reserve's primary inflation rate, the core PCE price index, matched expectations for July in the first big data test for Federal Reserve policy since Chairman Jerome Powell signaled a resumption of rate cuts is likely at the Sept. 17 meeting.
Powell's dovish surprise at Jackson Hole, Wyo., has fueled the S&P 500 toward record highs. The PCE inflation data are released with the monthly personal income and outlays report from the Bureau of Economic Analysis.
The S&P 500 fell modestly as Nvidia slid 3% on China concerns following Thursday's 0.8% slippage on earnings.
9:30 a.m. ET
Court Hearing Over Trump Firing Fed Governor
Fed Gov. Lisa Cook is asking a federal court to prevent President Trump's effort to fire her until her legal case plays out. Cook's legal team argues that the accusations against her relating to mortgage documents she signed before serving at the Fed cannot be a reason to fire her "for cause," which relates to actions taken while in her post.
A 10 a.m. ET hearing is about to start. If Trump is able to fire Cook, his appointees will have a majority on the seven-member Fed Board of Governors. That would put them in position to control who serves as president of the 12 regional Fed branches. The latter step is key because five of the 12 regional Fed presidents get a vote on monetary policy decisions.
Futures: Alibaba News Hits AI. Why This Isn't DeepSeek 2.0.
9:14 a.m. ET
PCE Inflation Data Details
A closer look at the data shows that the Fed's key core inflation gauge rose 0.273% on the month, a touch better than the 0.3% rounded figure provided by the Bureau of Economic Analysis. The core 12-month inflation rate rose to 2.877%, not quite all the way to 2.9%.
Despite worry over tariffs, core goods prices were unchanged in July vs. June, while core services prices rose 0.36%.
Core market-based prices rose a moderate 0.17% in July. That excludes categories like portfolio management, where a jump in payments in July reflected S&P 500 gains. On a 12-month basis, core market-based inflation edged up to 2.576% from 2.563%.
8:55 a.m. ET
Goods Trade Deficit Surges
The Census Bureau reported that the U.S. international trade in goods deficit blew out to $103.6 billion in July, way above estimates of $87.7 billion, according to Econoday. Imports surged 7.1%, which likely reflects some front-running to get ahead of tariffs, while exports dipped 0.1%.
June's goods deficit was revised down to $84.9 billion from $86 million.
8:48 a.m. ET
Fed Rate-Cut Odds Updated
After the July inflation data, markets are pricing in 87% odds of a quarter-point rate cut on Sept. 17, up from 83% just ahead of the data. Markets see 86% odds, up slightly from 84%, that the Fed will cut its key rate by at least 50 basis points over the year's final three policy-setting meetings.
8:46 a.m. ET
Personal Income And Outlays
Personal income rose 0.4% in July and personal consumption expenditures 0.5%, both as expected. Personal consumption grew a revised 0.4% in June, up from the initially reported 0.3%, pointing to a relatively solid consumer through July. However, economists expect that much of the impact of Trump tariffs on consumer prices is still to come.
8:41 a.m. ET
CPI, PPI Already Signaled PCE Inflation
The PCE inflation data are derived mostly from the early-month consumer price index and producer price index published by the Bureau of Labor Statistics. That data generally provides a clear signal of how the Fed's key inflation rate will come in. Suspense was low for today's report, but the stakes will be higher for August jobs and inflation data out in early September, ahead of the next Fed meeting.
8:36 a.m. ET
PCE Inflation Data As Expected
The Fed's key inflation rate, the core PCE price index, ticked up to 2.9% in July from 2.8% in June, as expected. Core prices rose 0.3% on the month, also in line with forecasts.
Headline inflation also matched forecasts of a 0.2% monthly increase and steady 2.6% 12-month inflation.
PCE Inflation Forecast
Economists expect the core personal consumption expenditures price index to rise 0.3% from June and 2.9% from a year ago. The Fed's key core inflation rate is expected to tick up from 2.8% in June.
Headline inflation, including food and energy, is expected to hold at 2.6% as prices rise 0.2% from June.
Fed Rate-Cut Odds
Ahead of the key inflation data, markets see 83% odds of a quarter-point Fed rate cut at the Sept. 17 meeting, according to CME Group's FedWatch tool.
With three meetings left this year, markets see 84% odds of at least 50 basis points in rate cuts by the Dec. 10 Fed meeting.
S&P 500
S&P 500 futures are pointing 0.3% lower ahead of the data, but that follows three straight record closing highs.
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