On Friday local time, the United States is set to release the Personal Consumption Expenditures (PCE) Price Index for June. Amid the recent increased volatility in the U.S. stock market, this data is likely to draw even more attention from outside observers.

Given the Federal Reserve's meeting minutes and officials' speeches that have repeatedly mentioned the increasingly balanced risks, if the latest data aligns with or exceeds expectations, discussions about a policy shift may not be far off. However, considering the resistance and uncertainties faced as future inflation moves towards 2%, the path following the first rate cut is equally uncertain.

The pace of price increases is expected to further slow down.

First Financial Daily's aggregation of Wall Street institutions' forecasts found that, after referencing the latest Consumer Price Index (CPI) data, the June PCE may see a year-on-year increase of 2.4% and a month-on-month increase of 0.1%. The core PCE is expected to grow by 2.5% year-on-year and by 0.1% month-on-month.

Due to the decline in gasoline costs and a slowdown in rent increases, the Consumer Price Index (CPI) fell by 0.1% month-on-month in June, with the year-on-year growth rate dropping to 3%, the lowest level since 2021. Deflation is back on track, as a slight increase in service costs is offset by falling commodity prices. However, the Producer Price Index (PPI) rose by 0.2% month-on-month in June, and with the revision of the previous month's data, it indicates an increase in upstream cost pressures.

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As the Federal Reserve's preferred inflation indicator, the PCE was flat month-on-month in May, with a year-on-year increase of 2.6%. Excluding the more volatile food and energy sectors, the core PCE grew by 0.1% month-on-month and by 2.6% year-on-year.

With the decline in commodity prices, Federal Reserve officials are closely monitoring changes in service prices within core inflation to gauge their latest progress in combating inflation. Data released earlier this month by the Institute for Supply Management (ISM) may have provided a positive signal. Due to a sharp decline in business activity and a drop in orders, the June ISM Services Index fell to 48.8, falling below the boom-bust line for the second time in three months. Analysts believe this will be an important signal for the release of service inflation pressures.

Also to be announced alongside the PCE are the monthly rates of personal income and personal expenditure. Both are of significant reference value for predicting future price trends, and the weakening of consumer spending and income expectations can help reflect the impact of demand on inflation.

In a report sent to First Financial Daily reporters, Wells Fargo wrote that as excess savings are depleted, high loan costs are putting pressure on consumer behavior. Demand for entertainment goods and durable goods sensitive to interest rates has noticeably weakened. However, considering the recent rebound in retail sales, the expenditure month-on-month rate is expected to grow by 0.4%, accelerating by 0.2 percentage points from May.

Personal income will continue to rise steadily, with an expected increase of 0.4%, slowing down by 0.1 percentage points from May. The bank believes that as the labor market returns to its pre-pandemic normal state, the slowdown in wage growth is the next headwind facing consumers.The Federal Reserve May Face New Trials

Affected by the ongoing uncertainty of inflation and economic prospects, the University of Michigan's Consumer Sentiment Index in July once again fell to a six-month low. The survey indicates a 1-year inflation expectation of 2.9%.

Despite signs of easing price pressures, JPMorgan Chase CEO Jamie Dimon recently issued another warning. "We still face a multitude of inflationary factors ahead: massive fiscal deficits, infrastructure demands, trade reorganizations, and geopolitical risks. Therefore, inflation and interest rates may be higher than market expectations."

Several high-ranking Federal Reserve officials have also expressed their hope for further data to confirm that inflation has slowed down sufficiently to justify a rate cut. Federal Reserve Chairman Powell admitted the recent improvement trend in price pressures during his congressional testimony this month, but emphasized that he is not yet ready to declare that inflation has been defeated, stating that "more good data" will strengthen the rationale for a rate cut.

Institutions have identified numerous short-term price risk factors. First, automobile insurance costs have risen sharply over the past year, increasing by 20.3% year-on-year. Bankrate Senior Economic Analyst Mark Hamrick stated, "There are various reasons for this. These include an increase in claims, rising automobile repair costs, and more frequent extreme weather events that could potentially damage vehicles." He anticipates that these costs will not drop significantly in the near future.

Second is the factor of electricity costs, which may continue to rise for consumers as the hottest period of the year approaches. The latest forecasts from energy researchers show that from June to September this year, the average cost for American households to cool their homes is expected to reach $719, higher than the previous year's $661.

Third, the cost of dining out has further exceeded the overall inflation rate. With the continuous rise in restaurant prices, some consumers are choosing to cut back on restaurant spending. Many businesses have already begun to feel these effects: McDonald's and Starbucks reported weak sales in the first quarter. Some chain stores have responded by lowering prices or offering new discounts. The University of Michigan's consumer survey includes an open-ended question asking consumers to assess their personal financial situation compared to a year ago, with about 20% of the responses mentioning food costs.

It is noteworthy that the Cleveland Fed's inflation model shows a slight rebound in the July PCE.

Oxford Economics Senior Economist Bob Schwartz previously told Yicai reporters that if the upcoming PCE is better than expected, the Federal Reserve will officially put the discussion of policy shifts on the agenda. However, he believes that this will not change the Federal Reserve's data-dependent path, and further rate cuts in the future will still depend on the performance of economic data. "The data ahead may be bumpy, and the Federal Reserve's policy trials are imminent."

Santander Capital Markets Chief Economist Stephen Stanley is concerned that recent inflation reports may have exaggerated the pace of inflation slowing down. The prices of some goods and services have experienced unusual declines. He believes this situation will not last long, and the Federal Reserve may experience another unwelcome data surprise, pushing the window for the first rate cut to November or later.