is the preferred inflation indicator for the Federal Reserve . Tonight, the U.S. core PCE price index annual rate in June recorded 4.8%, slightly exceeding the expected 4.7%. The U.S. PCE price index recorded a monthly rate of 0.6% in June, the largest increase since May 2021.
After the release of US PCE data, spot gold fell by $6 in the short term, and spot silver fell by nearly $0.2 in the short term. The yield on U.S. Treasury bonds rose slightly; the yield on 10-year US bonds once rose to 2.727%. USD index short-term higher 26 points.
, which was released simultaneously with PCE, recorded a monthly rate of personal spending in June in the United States, with an expected monthly rate of 0.90%, and the previous value was 0.20%. Institutions noted that U.S. consumer spending hardly recorded growth in June after a decline last month, highlighting decades of high inflation that has eroded American incomes and curbed demand.
It is obvious that inflation has become the biggest problem in the US economy. On July 27, the important centrist Democrat in the United States and Senator Manchin announced that he reached a consensus with Senate Democratic leader Schumer to support the Democratic Party’s "2022 Inflation Reduction Act" with up to $740 billion in the Senate, and through measures such as increasing taxes for large enterprises, to provide funds needed to ensure energy stability, respond to climate change, reduce fiscal deficits and extend medical insurance. But many Americans believe that the bill is difficult to effectively reduce inflation.
It is worth noting that yesterday, the US GDP recorded a negative value again in the second quarter, which means that the US economy has fallen into a "technical recession". Subsequently, White House released a statement by US President Biden on its official website: As the Federal Reserve tightens policies to reduce inflation, it is not surprising that the economy slows down.
Biden said: "Our path is right; the job market is in the strongest period in history, and consumer spending continues to grow. The focus of the economic plan is to reduce inflation and urge the chip bill to pass."
US Treasury Secretary Yellen also said that the real recession is "broad economic weakness" and "this is not what we are seeing now." She called for avoiding semantic battles on the definition of recession and reiterated that reducing inflation is the government’s priority.
On Friday, the Fed's former dovish, Atlanta Fed Chairman Bostic said that still has a lot of work to do in controlling inflation. The Fed "will have to do more" in terms of interest rates, but the details depend on data in the coming months. Although Bostic firmly believes that the United States is still some distance away from a recession, he also said that widespread concerns about the recession may really lead to a recession.
Under the Fed's sharp rate hike , whether the US economy is on the verge of recession has become a sensitive issue. The White House is vigorously calming recession expectations as Biden tries to win voter support ahead of the November midterm elections. However, Wall Street generally expects the U.S. economy to fall into recession later this year or in 2023. A Morning Consult/Politico poll earlier this month showed that 65% of registered voters, including 78% of Republicans, believe the economy has fallen into recession.
Feder rate futures traders' expectations for December indicator rate fell to 3.25% Thursday, compared with 3.4% before the Fed's decision was announced on Wednesday. The market's expectations for the cumulative interest rate hike in the remainder of 2022 also fell from 108 basis points before the Federal Reserve announced its decision on Wednesday to 92 basis points. Interest rate markets show that the Fed's chances of raising interest rates by 50 basis points at its next meeting in September are 76%.
The market's expected cooling of Fed rate hike also comes from a dovish interpretation of Fed Chairman Powell's speech. However, Citi believes that Powell is more hawkish than the market interprets it. Although Powell suggests that the market also expects a 75 basis point rate hike in September, Citi still expects core inflation to drive the Fed to act more radically, with interest rates reaching 4% by the end of the year. Michael Matousek, chief trader at Global Investors, said inflation will not end with this Fed rate hike, but considering the downtrend of gold, it is now at an attractive level, providing opportunities for investors seeking to diversify their portfolios.
This article is derived from Jinshi data
