The release of the U.S. Personal Consumption Expenditures (PCE) price index, due this Friday June 27, is the major macroeconomic event of the week. The Federal Reserve's (Fed) preferred inflation indicator, the PCE could play a decisive role in determining the direction of US monetary policy in the second half of 2025.
1) PCE inflation is the Fed's favorite inflation index
The economic context is particularly delicate. At its last meeting, the Fed maintained its key rate between 4.25% and 4.5%, while revising its macroeconomic projections. It now anticipates weaker growth, higher inflation and slightly higher unemployment by the end of 2025. This cautious stance reflects the many uncertainties, notably geopolitical and trade uncertainties, and tensions over raw materials, particularly oil. These factors could revive fears of a stagflation scenario, i.e. a combination of weak growth and persistent inflation.
Against this backdrop, the PCE figure for May is of strategic importance. The Fed remains attentive to what this indicator shows: confirmation of a slowdown in price rises would reinforce the hypothesis of a first rate cut as early as September. Conversely, an unexpected rebound, driven in particular by energy prices or the new tariffs introduced by the Trump administration, could postpone this deadline and intensify tensions on financial markets.
2) The stagflation scenario is still avoidable
However, the immediate outlook for PCE seems relatively contained. According to leading indicators of underlying inflation, the components most sensitive to fluctuations in world prices, such as services and real estate, are not showing any signs of overheating. On the other hand, the recent rise in oil prices, stimulated by tensions in the Middle East, could lead to a temporary increase in nominal inflation. Its overall impact is estimated at around 10%, which remains moderate at this stage.
Beyond this release, markets are weighing up the chances of the Fed taking action ahead of its key meeting on Wednesday September 17. Should geopolitical uncertainty diminish and inflation figures continue to normalize, the conditions for monetary easing would be met. At present, ten FOMC members are leaning towards two rate cuts by the end of the year, while seven prefer to maintain the status quo. Fed Chairman Jerome Powell was cautious, insisting on the need to be guided by economic data.
All in all, the June 27 ECP will act as an eye-opener. It will shed light on the current state of inflationary dynamics in the United States, and strongly influence investor expectations. If it reinforces the idea that inflation is converging towards the 2% target on a sustainable basis, markets could regain confidence in a more accommodating monetary policy.
In any case, the Fed will have to navigate skilfully between ambiguous economic signals, persistent exogenous risks and growing political pressure. Friday's PCE figure represents much more than a simple monthly indicator: it is a compass for US monetary strategy.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
1) PCE inflation is the Fed's favorite inflation index
The economic context is particularly delicate. At its last meeting, the Fed maintained its key rate between 4.25% and 4.5%, while revising its macroeconomic projections. It now anticipates weaker growth, higher inflation and slightly higher unemployment by the end of 2025. This cautious stance reflects the many uncertainties, notably geopolitical and trade uncertainties, and tensions over raw materials, particularly oil. These factors could revive fears of a stagflation scenario, i.e. a combination of weak growth and persistent inflation.
Against this backdrop, the PCE figure for May is of strategic importance. The Fed remains attentive to what this indicator shows: confirmation of a slowdown in price rises would reinforce the hypothesis of a first rate cut as early as September. Conversely, an unexpected rebound, driven in particular by energy prices or the new tariffs introduced by the Trump administration, could postpone this deadline and intensify tensions on financial markets.
2) The stagflation scenario is still avoidable
However, the immediate outlook for PCE seems relatively contained. According to leading indicators of underlying inflation, the components most sensitive to fluctuations in world prices, such as services and real estate, are not showing any signs of overheating. On the other hand, the recent rise in oil prices, stimulated by tensions in the Middle East, could lead to a temporary increase in nominal inflation. Its overall impact is estimated at around 10%, which remains moderate at this stage.
Beyond this release, markets are weighing up the chances of the Fed taking action ahead of its key meeting on Wednesday September 17. Should geopolitical uncertainty diminish and inflation figures continue to normalize, the conditions for monetary easing would be met. At present, ten FOMC members are leaning towards two rate cuts by the end of the year, while seven prefer to maintain the status quo. Fed Chairman Jerome Powell was cautious, insisting on the need to be guided by economic data.
All in all, the June 27 ECP will act as an eye-opener. It will shed light on the current state of inflationary dynamics in the United States, and strongly influence investor expectations. If it reinforces the idea that inflation is converging towards the 2% target on a sustainable basis, markets could regain confidence in a more accommodating monetary policy.
In any case, the Fed will have to navigate skilfully between ambiguous economic signals, persistent exogenous risks and growing political pressure. Friday's PCE figure represents much more than a simple monthly indicator: it is a compass for US monetary strategy.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
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Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Pubblicazioni correlate
Declinazione di responsabilità
Le informazioni ed i contenuti pubblicati non costituiscono in alcun modo una sollecitazione ad investire o ad operare nei mercati finanziari. Non sono inoltre fornite o supportate da TradingView. Maggiori dettagli nelle Condizioni d'uso.