Fed Unveils Exit Strategy... Focus on Personal Consumption Expenditures Inflation

Personal Consumption Expenditures Price Index Scheduled for Release Next Week

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] As the U.S. Federal Reserve (Fed) hinted at adjusting the pace of asset purchases, an analysis has emerged emphasizing the need to focus on the Personal Consumption Expenditures (PCE) price index.

According to Mirae Asset Securities on the 22nd, the financial market continues to bear the burden of the Fed's exit strategy. On the 19th (local time), the Fed released the minutes of the Federal Open Market Committee (FOMC) regular meeting, agreeing that if the economy recovers rapidly, it will be necessary to adjust the pace of asset purchases. Hee-chan Park, a researcher at Mirae Asset Securities, explained, “Since this is still a change at a theoretical level, the impact on the financial market will be limited,” adding, “The U.S. dollar index is at its previous low level, and the euro is strengthening amid expectations that the European Central Bank (ECB) may reduce the scale of asset purchases in the third quarter.”

Among next week's economic indicators, attention should be paid to the PCE price index. Since the sharp rise in the Consumer Price Index (CPI) was confirmed last month, market consensus forecasts for the PCE price index have also increased. Researcher Park said, “If the results come out as expected, it will record the highest year-on-year increase since 1993 and the highest month-on-month increase since 2001,” adding, “The burden related to the exit strategy issue will increase.” It is also necessary to check whether there will be any changes in stance regarding inflation and monetary policy at the Bank of Korea’s Monetary Policy Committee.

Meanwhile, there was also an opinion that the composition of stocks in cyclical sectors should be diversified into consumer goods. After China announced steel production cuts for June last week, iron ore prices turned downward, falling 15% from their peak. Commodity prices are generally weak. Researcher Park said, “Inflation is expected to ease,” and “the need to diversify portfolios into consumer goods within cyclical sectors has increased.”

This content was produced with the assistance of AI translation services.