Federal Reserve Gauges Economic Strength Ahead of September Rate Decision
Federal Reserve officials are closely monitoring incoming economic data this week to inform their decision on interest rates in September. Governor Christopher Waller, along with regional Federal reserve bank presidents John Williams (New York), Lori Logan (Dallas), and Tom Barkin (Richmond), are scheduled to deliver public remarks. Their statements will be scrutinized for clues about the central bank’s leaning.
The assessments come as economists anticipate a robust reading in the latest Purchasing Managers’ Index (PMI),perhaps the highest as February. Bloomberg Economics experts suggest that strengthening economic activity could empower companies to pass on increased costs to consumers, a development that could complicate efforts to lower inflation.
“We expect the index to show the highest reading since February.If economic activity gains momentum, companies may be able to pass more costs to consumers. This increases the risk of consumer price reports and the upcoming jobs report for the month of August is not supportive to reduce interest in september,” stated analysts Anna Wong, Stewart Paul, Elisa Winger, Esteel Ou, and Chris J. Collins of Bloomberg economics.
Friday’s release of personal consumption expenditures (PCE) data for July is expected to reveal the largest increase in consumer spending on goods and services since March. Economists will also be analyzing personal income figures to gauge consumers’ ability to sustain their spending, a critical factor driving overall economic growth. The PCE is the Federal Reserve’s preferred inflation gauge.
The data releases follow closely on the heels of Federal Reserve Chairman jerome Powell’s recent speech at the Jackson Hole Economic Symposium, where he emphasized the central bank’s commitment to bringing inflation back to its 2% target, even if it means continued economic pain. Powell signaled that while inflation has moderated, it remains too high.
On Thursday, the Bureau of Economic Analysis will publish revised second-quarter GDP data.Initial estimates indicated a solid pace of economic growth in the April-June period. The revised figures are expected to show a moderate improvement in personal consumption, following a slower start to the year. The initial estimate for second-quarter GDP growth was 2.4%, a important increase from the first quarter’s 2.0% pace.
