The latest Personal Consumption Expenditures (PCE) data for May came in line with analyst expectations, with a reading of 2.6%. To understand the implications for future Federal Reserve rate cuts, BMO senior economist and managing director Jennifer Lee joins Morning Brief to offer her insights.
Lee describes the PCE data as "the best one can expect," suggesting it should bolster the Fed's confidence in easing monetary policy. She notes a "softness" in services spending, which she views positively as it may help cool the previously sticky services inflation. Despite this, Lee observes that consumers continue to spend on discretionary items.
Based on this report, Lee anticipates a potential Fed rate cut in September. She explains, "Over the next couple of months, we'll accumulate more inflationary data. This PCE report is one of the more significant pieces we've seen since the May CPI. We need to see all inflation indicators aligning, which will give the Fed the comfort and confidence to start cutting rates in September."
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