Fed’s Favorite Inflation Gauge Signals September Rate Cut as Labor Market Weakens

The Federal Reserve's preferred inflation measure, the Core PCE index, rose 0.3% month-on-month in July, reinforcing expectations of a September rate cut. With annual inflation running at 2.9% and signs of labor market softening, Fed Governor Christopher Waller has publicly endorsed a 25 basis point reduction.

Waller's Thursday remarks in Miami highlighted growing concerns about hidden job losses. "The economy may have lost jobs over the past several months," he warned, citing Bureau of Labor Statistics revisions. The Fed governor emphasized proactive measures, stating conditions could deteriorate rapidly without intervention.

Market participants now view the September 16-17 FOMC meeting as a near-certainty for monetary easing. The broader PCE index's 2.6% annual increase, combined with Waller's dovish pivot, creates a favorable environment for risk assets including cryptocurrencies.