In June, personal income rose 0.4%, above expectation of 0.3%. Personal spending rose 0.3%, matched expectations. Headline PCE was unchanged at 1.4% yoy, missed expectation of 1.5% yoy. Core PCE inflation accelerated to 1.6% yoy, up from 1.5% yoy, but missed expectation of 1.7% yoy.
The lack of materialistic acceleration in core inflation does nothing to alter FOMC policymakers’ mind regarding tomorrow’s rate decision. For now, Fed is still generally expected to cut interest rate by -0.25bps to 2.00-2.25%. The main question is whether Fed would explicitly say that it’s a one-off, or it’s a start of a policy easing cycle.
USD/JPY is steady after the release, staying a little bit soft. After temporary top was formed after failing to break through 108.99 resistance earlier this week. But for now, further rise is expected as long as 107.93 support holds. Break of 108.99 should eventually be seen.
