US Core PCE Jul'23 inflation report - good or bad?

The Core PCE Price Index is a measure of the prices paid by people living in the United States, or those buying on their behalf, for goods and services. It excludes two categories that can have price swings – food and energy – to make underlying inflation easier to see.

The core PCE price index is closely watched by the Federal Reserve as it conducts monetary policy. The Fed has a 2 percent target for inflation, and the core PCE price index is seen as a good measure of how close inflation is to that target.

In recent months, the core PCE price index has been rising at a faster pace than the Fed would like. In June 2023, it rose by 4.1% year-over-year.

For July, it grew by 4.2% YoY.

This shows that there is a monthly pickup in inflation than the CI released earlier this month. Although reports show a decline in the price of goods, healthcare, financial advice, transportation and insurance shave advanced more dramatically.

Barclays analysts have turned skeptical that inflation is on track to return to the 2% target without a significant easing of labor market conditions.

So this would most likely point to another rate hike.

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