Fed Caution: Markets Wary of Interest Rate Hike

Recent data releases in the US have left markets cautious about the Federal Reserve's (Fed) next move, according to ING strategist Francesco Pesole. The US Personal Consumption Expenditures (PCE) Price Index showed disinflation is on track, but at a gradual pace.

The PCE index printed 0.2% month-on-month and 3.3% year-on-year, with core PCE matching expectations. However, headline PCE came in slightly firmer at 0.2% MoM and 3.7% YoY, prompting a small hawkish repricing in the USD curve.

Pesole notes that real personal spending was unchanged in July despite higher real disposable income, with households opting to save rather than spend. This suggests that growth remains soft, which may impact the Fed's decision on interest rates.