Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, joins “Mornings with Maria” to share his thoughts on some of the headlines in the U.S. economy.
The inflation indicator is Federal Reserve System It rose slightly in July as rising prices continue to weigh heavily on millions of Americans.
The Commerce Department said Friday that its personal consumption expenditures price index rose 0.2% from the previous month and 2.5% from a year earlier. These figures were roughly in line with expectations.
Excluding more volatile food and energy prices, so-called core prices rose 0.2 percent for the month, keeping them 2.6 percent up compared with the same period last year.
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The Federal Reserve is targeting the headline PCE reading to bring consumer prices back to 2%, but policymakers believe the core data is a better indicator of inflation. Both the core and headline figures show inflation continuing to decline.
A customer browses food displays at a Costco store in Colchester, Vermont, on August 16, 2024. (Photo by Robert Nickelsburg/Getty Images/Getty Images)
“Inflation still appears to be subdued, which is good news for the economy and for investors who are betting on lower interest rates,” said Chris Larkin, managing director of trading and investments at E*Trade.
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Other figures in the report showed that consumer spending rose 0.5% in July, up from a 0.3% increase in June, as Americans continue to loosen their purse strings. Consumer spending has proven surprisingly strong despite high prices, soaring interest rates and a renewed economic crisis. Federal Student Loan Payments.
The report also showed that personal income rose 0.3 percent last month, slightly more than expected.
The data came as investors looked for signs the Fed was ready to cut interest rates, after policymakers including Chairman Jerome Powell signaled in recent days that they were ready to start adjusting policy.
“The time has come to adjust policy,” Powell said in a keynote speech at Jackson Hole last week. “The direction to move is clear, and the timing and pace of rate cuts will depend on upcoming data, evolving outlooks, and the balance of risks.”
With the economy weakening and signs of still-moderating inflation, investors are increasingly betting the Fed will cut interest rates in September. In fact, about 30% of traders are pricing in another half-percentage point cut next month amid growing concerns about the state of the labor market.
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“If inflation slows further, the Fed could have room to cut rates more aggressively at future meetings, especially if the labor market deteriorates sharply,” said Ben Ayers, senior economist at Nationwide.
