Core PCE inflation meets forecasts at 0.2% MoM, but hawkish market pricing and Fed commentary keep rate hike odds elevated.
The US Dollar Index (DXY) remains near 99.0 as markets weigh recent PCE data against hawkish Fed signals. Core PCE, the Fed’s preferred inflation gauge, rose 0.2% month-on-month and 3.3% year-on-year, aligning with expectations but failing to ease rate hike concerns.
Headline PCE printed slightly firmer at 0.2% MoM and 3.7% YoY, while real personal spending stalled in July despite higher disposable income. Markets now price a 50% chance of a September rate hike, up 9 basis points, as Fed officials’ rhetoric keeps pressure on the hold view.
Kevin Warsh’s upcoming Jackson Hole speech could further lift hike odds, reinforcing USD support. Strategists warn the Fed may avoid triggering bond volatility by leaning hawkish if markets price in tighter policy.