PCE Inflation Forecasted Above 2% Target Ahead of Jackson Hole Meeting

The US Bureau of Economic Analysis is set to release the Personal Consumption Expenditures (PCE) Price Index data for July on Wednesday at 12:30 GMT. The PCE Price Index is a key indicator that gauges inflationary trends and informs the Federal Reserve's monetary policy decisions.

According to forecasts, core PCE inflation is expected to remain well above the Fed's 2% target in July, with a 0.2% month-over-month (MoM) acceleration from June's 0.1%. This would keep core PCE at 3.3%, still below May's peak but above the central bank's target.

The release of this data will likely be closely watched by investors seeking clues about the Fed's near-term policy direction. However, strategists at DBS Bank caution that the market reaction may be muted due to the upcoming Jackson Hole central bankers' meeting on Friday, where Fed Chairman Kevin Warsh is expected to provide further insights.

Futures markets currently price a 38% chance of a quarter-point interest rate hike in September, down from 55% one month ago. The declining probability of an interest rate increase has sparked doubts about the Fed's commitment to fighting inflation, which may be tempered by a strong reading on PCE inflation.