The Federal Reserve’s preferred inflation measurement for August is set to be released on Friday, along with other economic data. If the inflation reading is higher than expected, it could suggest that the Fed’s cycle of interest rate hikes may not be over yet. This news is likely to act as a headwind for risk assets. On the other hand, if the data is lower than expected, it may signal that the Fed will not raise rates further.
The consensus for the Core PCE Price indexes is 3.9% year-on-year and 0.2% month-on-month. However, the ranges for these measurements are 3.7% to 4.2% and 0.0% to 0.3% respectively. While results that deviate from the consensus are more likely to have an impact on the market, results below the minimum or above the maximum will have an even greater influence.
Therefore, investors and analysts will closely watch the inflation data as it could potentially shape expectations for future monetary policy decisions by the Fed. Any surprises in the numbers could lead to significant movements in risk assets.