The US will release June's Personal Consumption Expenditures (PCE) on Friday at 08:30 PM Malaysia time, attracting significant attention due to recent stock market volatility.

Analysts believe the data could prompt policy discussions, noting the Federal Reserve's outlook that risks are increasingly balanced. While strong data might encourage rate cut talks, uncertainties in achieving 2% inflation keep future paths unclear.

Other notable events on Friday are as follows:

Service Prices Are in Focus

Wall Street forecasts expect June's PCE to rise by 2.4% year-on-year and 0.1% month-on-month, while core PCE is anticipated to increase by 2.5% year-on-year and 0.1% month-on-month.

This outlook follows the latest Consumer Price Index (CPI) data.

The CPI experienced a decline of 0.1% month-on-month in June, with the year-on-year growth rate dropping to 3%, marking the lowest level since 2021. Experts suggest that deflation is reemerging as a modest rise in service costs is counterbalanced by falling commodity prices.

The PCE, preferred by the Federal Reserve as a gauge of inflation, remained unchanged in May and rose by 2.6% year-on-year. Core PCE, which excludes volatile food and energy prices, increased by 0.1% month-on-month and 2.6% year-on-year.

With declining commodity prices, Fed officials are attentively monitoring fluctuations in service prices within core inflation to evaluate their progress in controlling inflation.

An 85%+ Chance of Monetary Easing

Despite signs of easing price pressures, JPMorgan Chase CEO Jamie Dimon has issued another warning, noting several inflationary factors ahead, including large fiscal deficits, infrastructure needs, trade restructuring, and geopolitical risks.

Dimon suggested that:

inflation and interest rates might end up higher than market expectations.

Several senior Fed officials hope that continued data will confirm inflation has slowed sufficiently to justify a rate cut.

During his congressional hearing testimony this month, Fed Chairman Jerome Powell acknowledged the recent improvement in price pressures but emphasized that he was not ready to declare victory over inflation.

He stated that "more good data" would strengthen the case for a rate cut.

Bob Schwartz, senior economist at Oxford Economics, believes that:

if the upcoming PCE is better than expected, the Fed will officially put the discussion on policy shift on the agenda.

However, he stressed that this will not change the Fed's data-dependent path, and further interest rate cuts in the future will still depend on the performance of economic data.

According to the CME FedWatch tool, bond traders peg the odds of a September rate cut at nearly 85.8% as of 10:17 PM Malaysia time.