MNI BRIEF: Softer PCE Inflation In July Eases Pressure On Fed

U.S. PCE inflation, the Fed's preferred gauge of inflation, fell 0.1% in July while core PCE inflation added 0.1%, the Bureau of Economic Analysis said Friday, a bigger slowdown from June than expected and one that could bolster the case for the FOMC to slow the pace of rate hikes.

From a year ago, PCE inflation is up 6.3%, five-tenths lower than in June, and core inflation is 4.6%, a two-tenths slowdown from a month earlier.

Markets had anticipated headline and core to have risen 0.1% and 0.3%, respectively. The miss boosted Treasury futures with the 2-year yield falling around 3bps on the release. The dollar darted briefly lower but quickly pared losses as investors await signals from Fed Chair Jerome Powell's speech at the annual Jackson Hole monetary policy conference. (See MNI INTERVIEW: Fed's Harker Wants Rate Above 3.4% By Year-End)

Personal income rose 0.2% in the month and current dollar personal consumption expenditures rose 0.1%, in line with market expectations.