Market analysts forecast positive numbers for the May report. Expect the cost of goods and services to increase at an annual rate of 2.6%, down slightly from April's 2.7%. More importantly, core PCE is expected to fall to 2.6% (on an annual basis) in May, from 2.8% in April. If these forecasts come true, it would signal a further reduction in inflationary pressures. , bringing the economy closer to the Fed's 2% inflation target.
Fed officials, including Chairman Jerome Powell, have repeatedly emphasized the need for a sustained positive economic data trend before considering a change in monetary policy. In the recent press conference of the Federal Open Market Committee (FOMC), Mr. Powell reaffirmed this view: "We have stated that reducing the federal funds rate target range will not be appropriate until when we have greater confidence that inflation is moving towards 2% sustainably."
The market's growing confidence in the Fed's ability to change policy is reflected in the probability of cutting interest rates. CME's FedWatch tool currently shows that there is only a 35.9% chance that the Fed will keep current interest rates unchanged (from 5.25% to 5.50%) through September. This is a significant change in market sentiment, down from 37.7% just one day ago and 50.2% a month ago. This trend shows growing optimism about when the Fed will move toward normalizing interest rates.
On Thursday afternoon, 6:00 pm ET, the August gold futures contract was trading actively, soaring 28.90 USD (equivalent to 1.25%) to 2,338.70 USD/oz. Although a weaker USD provided some support, the main driver of the rally was bullish market sentiment centered on expectations for Friday's PCE report.
Fed officials, including Chairman Jerome Powell, have repeatedly emphasized the need for a sustained positive economic data trend before considering a change in monetary policy. In the recent press conference of the Federal Open Market Committee (FOMC), Mr. Powell reaffirmed this view: "We have stated that reducing the federal funds rate target range will not be appropriate until when we have greater confidence that inflation is moving towards 2% sustainably."
The market's growing confidence in the Fed's ability to change policy is reflected in the probability of cutting interest rates. CME's FedWatch tool currently shows that there is only a 35.9% chance that the Fed will keep current interest rates unchanged (from 5.25% to 5.50%) through September. This is a significant change in market sentiment, down from 37.7% just one day ago and 50.2% a month ago. This trend shows growing optimism about when the Fed will move toward normalizing interest rates.
On Thursday afternoon, 6:00 pm ET, the August gold futures contract was trading actively, soaring 28.90 USD (equivalent to 1.25%) to 2,338.70 USD/oz. Although a weaker USD provided some support, the main driver of the rally was bullish market sentiment centered on expectations for Friday's PCE report.
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