Us Pce Index Jumped In July

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Us Pce Index Jumped In July

US PCE Index Reached 3.3% In July While Jobless Claims Declined

In July, the speed of the inflation picked up pace while the jobless claims saw a sizeable reduction that surprised everyone. In the next few weeks, the Federal Reserve will also decide whether it wants to keep the interest rates unchanged or introduce a rate hike/cut.

The PCE Index is a measure of personal consumption expenditure and thus is closely linked with inflation in the USA. Overall, the 12-month value of the PCE index touched 3.3% during July, which was in line with the estimates. In June, the PEC index's reading was 3.0%, which tells us that an increase of 0.3% was seen in the yearly value.

And if we look at the PCE index's core reading, which doesn't include energy & food prices, the increase was 4.2% YoY and around 0.% MoM.

PCE Index Close To Fed's Target

Federal Reserve actually prefers the PCE index a lot more than other inflation measures, which makes it a significant economic indicator. The Fed's target is around 2%, while the actual PCE index is hovering near 3.3% which is around 1.3% higher.

Overall, the data from the USA this week suggests that a high-interest rate is hurting the US labor market. During July, new job openings took a hit, while the resignations also took a hit. This suggests that fewer people are leaving their jobs, which also suggests that there might be fewer available jobs.

The data from the labor department shows that jobless claims turned lower and reached 228,000 from an earlier value of 232,000.

It appears that one of the targets the Fed wants to achieve from its tightening cycle is to cool down the labor market. Through their policies, they want to slow down the wage growth, which would help lower the inflation rate as well.

Looking ahead, the nonfarm payrolls are due, which will tell a wider picture of the US labor market health. According to the markets, around 170K jobs might be added to the US economy, which will be a step down from the earlier value of 187K last month.

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