The September PCE data is the final hurdle before the next FOMC meeting

September’s PCE Index data will be belatedly released on Friday, 5th of December after being delayed because of the US government shutdown.

Economists expect unchanged core inflation in September

Economists predict that US inflation in September was largely unchanged from the previous month. The last PCE Index data for August was published at the end of September, revealing core PCE growth of 2.9%. Forecasters predict that annual core inflation remained unchanged for the month, with headline inflation edging up modestly to 2.8% from 2.7%. The month-on-month growth is forecast to be 0.2% for the core and 0.3% for the headline, respectively.

(Source: Trading Economics)

PCE data is the last big release before December FOMC meeting

The PCE data is the final tier-1 release before the final FOMC decision of 2025. After a period of uncertainty about what the Fed is likely to do with rates at the upcoming meeting, the markets are pricing in a high likelihood of a cut. Federal Funds Futures point to a roughly 90% chance of a rate reduction, having fallen to as low as 90% following warnings from the Fed at its October meeting that a cut is “not a foregone conclusion”. 

(Source: CME Group)

The outdatedness of this PCE data may mean it carries less weight with market participants and doesn’t impact rates markets pricing as much as it otherwise would. However, a higher than expected print could lead the market to price in the marginally lower odds of a cut at the meeting, or a flatter rates curve as further cuts in 2026 get priced-out. Alternatively, a benign read could all but give the markets permission to fully price in a cut.

US Dollar reverses as markets price-in rate cuts

The higher prospects of a December Fed cut has weighed on the US Dollar. Further downward pressure on the Greenback has emerged as the markets price-in a deeper cutting cycle going in 2026 as the odds rise Kevin Hassett, known policy dove and Trump loyalist, will be at the helm of the Fed once current Chair Jerome Powell’s term ends next year.

The Dollar’s tentative trend reversal, following a 2025 which saw a more than 12% peak-to-trough correction, appears to be breaking down. The EUR/USD is rebounding,carving out what appears to be a higher-low on the charts around 1.15. The pair has also broken resistance at roughly 1.1550, with the next major level potentially 1.1730.


(Source: Trading View)
(Past performance is not a reliable indicator of future results)