Inflation 'Shock' to Unveil Ahead of Jackson Hole! July Core PCE Expected to Hit 3.3%, September Rate Hike Bets Heat Up

At 20:30 Beijing time tonight, the U.S. Department of Commerce will release the July Personal Consumption Expenditures (PCE) Price Index. Market forecasts show that July’s headline PCE will rise 0.1% month-over-month, with its year-on-year growth rate falling from 3.7% in June to 3.6%. Core PCE is expected to climb from 0.1% to 0.2% month-over-month, while its year-on-year rate holds at 3.3% — marking the 65th consecutive month above the Federal Reserve’s 2% inflation target. Notably, price increases in the AI industry chain, higher stock market valuations driving portfolio management fees, and rising energy costs due to Middle East tensions could all act as potential drivers of core inflation. Goldman Sachs estimates the stock market valuation factor alone may contribute roughly 0.11 percentage points to July’s core PCE month-over-month growth. What draws even greater market attention is that the U.S. Bureau of Economic Analysis (BEA) plans to fully revise its PCE calculation methodology by the end of September. Going forward, adjustments may be made to price calculations for categories including computer hardware, stock portfolio management, and legal services, with possible historical data revisions that could complicate the interpretation of inflation figures. Currently, divisions over the Federal Reserve’s September policy path are intensifying. CME Group’s FedWatch Tool shows a 59.9% probability the Fed will hold interest rates steady in September, while the chance of a 25 basis point hike has risen to 40.1%. The market is also awaiting this week’s Jackson Hole Economic Symposium to seek the latest signals from Fed Chair Powell on inflation and future interest rate policies.