Overview

• Commerce Department data show July PCE inflation at 2.6% year over year with core at 2.9%, matching forecasts, while monthly gains were 0.2% and 0.3%, respectively.
• Futures imply roughly an 85%–87% chance of a quarter-point cut at the Sept. 16–17 meeting, with next week’s August jobs report viewed as a potential swing factor.
• Fed Governor Christopher Waller backed a 25-basis-point reduction in September and said he anticipates additional cuts over the next three to six months, contingent on incoming data.
• Services prices remained the main source of core inflation as goods prices were subdued; consumer spending rose 0.5% and incomes increased 0.4% in July.
• A lawsuit over President Trump’s attempt to remove Governor Lisa Cook has a hearing set for Friday morning, creating governance uncertainty that could affect participation at the September meeting.