PRIMER - US PCE inflation data is due at 13:30BST/08:30EDT

The consensus expects headline PCE prices to rise by +0.1% M/M in July (prev. -0.1%), with the annual rate expected to tick down to 3.6% Y/Y (prev. 3.7%); the core measure is seen rising by +0.2% M/M (prev. 0.1%), with the annual rate of core PCE seen unchanged at 3.3% Y/Y. In July, headline CPI rose by +0.1% M/M (prev. -0.4%), with the annual rate slipping to 3.4% Y/Y (prev. 3.5%); the core CPI metric printed +0.2% M/M (prev. 0.0%), with the annual core rate down one-tenth to 2.5% Y/Y. Meanwhile, headline PPI was unchanged in July (prev. -0.3%), with the annual rate dropping to 4.7% Y/Y from 5.5%; the core PPI measure rose +0.2% M/M, missing expectations for +0.3%, while the annual rate fell to 4.2% Y/Y from 4.7%. Writing after the CPI and PPI reports, WSJ Fedwatcher Nick Timiraos said that most forecasters were looking for a July core PCE reading of 0.22% M/M, and 3.3% Y/Y, adding that this would imply ‘no wedge’ with the July core CPI (also +0.22%); he noted that portfolio management fees are making a meaningful contribution to the core PCE measure in July. The data will be key in helping to shape expectations for the September FOMC meeting, where pricing for a rate hike has diminished following downside surprises in the latest jobs data, cooling inflation metrics, weak retail sales and a GDP miss. At the time of writing, markets are pricing a 65% probability of a hold vs 50/50 before the July data releases. However, traders may keep some powder dry ahead of Fed Chair Warsh’s appearance at Jackson Hole towards the end of the week.