Why the Fed Is Watching the Core PCE Surprise

Core inflation came in hotter than expected in July, with the Fed's preferred gauge rising 0.3 percent for the month. That nudges the annual rate to 3.3 percent, well above the Fed's two percent target. On this episode, Lucas and Luna dig into what the core PCE reading means for the Fed's timeline and the market's reaction. They break down why the two-year yield has room to drift higher, how policy expectations have shifted since the June FOMC meeting, and why the Fed's preferred inflation measure matters more than the headline CPI. They also explore the interplay between interest on reserve balances, the effective fed funds rate, and the Fed's ability to steer short-term rates as the balance sheet shrinks. With the Fed in a holding pattern, the conversation turns to how much weight the central bank places on a single data point versus the broader trend. A must-listen for anyone tracking the Fed's next move. #CorePCE #Inflation #FederalReserve #MonetaryPolicy #FOMC #InterestRates #FedWatch #TwoYearYield #TreasuryYields #BalanceSheet #Economics #Economy #Investing #Markets #FexingoBusiness #BusinessPodcast #CentralBanking #PriceStability Keep every episode free: buymeacoffee.com/fexingo