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US Commerce Department figures released overnight showed the Personal Consumption Expenditures price index rose 0.2 percent month on month in July, topping forecasts for a 0.1 percent increase, while climbing 3.7 percent from a year earlier against expectations of 3.6 percent. The data left expectations for a Federal Reserve rate hike by year end intact even as the central bank prepares for its Jackson Hole symposium later Thursday, according to market analysts. Reuters reported that the dollar index gained 0.21 percent to 99.13, its highest reading since August 19.
According to Reuters, Westpac economist Ryan Wells said in a note that Chairman Kevin Warsh’s upcoming speech at Jackson Hole “will be the ultimate test”. CME FedWatch data placed the probability of a rate hike at the September meeting at around 40 percent, up slightly from before the release. This development comes as the Fed holds its benchmark rate in a 3.50-3.75 percent range following recent policy decisions.
The dollar traded at 159.23 yen, having surrendered much of its recent intervention-related strength while staying clear of multi-decade lows, Reuters figures showed. Market participants awaited comments from Bank of Japan Deputy Governor Ryozo Himino scheduled for later in the session on potential September tightening. Currency traders balanced the US data against signals from other major central banks.
Bloomberg noted that the inflation reading, the Fed’s preferred gauge, remained nearly twice the central bank’s 2 percent target despite signs of cooling in consumer spending that came in flat for the month. The combination has left investors navigating mixed economic signals as they assess the path for monetary policy. Treasury yields rose alongside the dollar in response to the figures, according to trading platforms.
The Jackson Hole symposium, hosted annually by the Federal Reserve Bank of Kansas City, draws global central bankers and offers a key venue for policy discussion, with this year’s event focusing heavily on the US outlook. Warsh, in his first year as chairman, faces scrutiny over whether further rate adjustments will be needed to tame inflation. Economists have pointed to the data as reinforcing the case for caution in easing policy too soon.
Financial markets have seen the dollar index fluctuate within a relatively tight band in recent weeks before the latest upside move, a Reuters assessment found. The latest advance recovered some ground lost in prior sessions tied to other policy announcements. Additional reports indicated that a full 25 basis point hike is fully priced in by December.
