This week a litany of economic data will be released with the latest reading of the Personal Consumption Expenditures (PCE) index, also known as one of the Fed's preferred inflation gauge, will be released on Friday. With the debate over what the next policy decision from the Federal Reserve could look like raging on, many on Wall Street will watch closely for the results of the reading.
Chief Economist Allianz Ludovic Subran joins The Morning Brief to give insight into what the upcoming PCE data could tell investors about the next policy decision from the Fed.
On the upcoming PCE data, Subran states: "If we get another PCE above 3.5 or 4% the problem is we are going to have to delay the Fed's first rate cut after the summer. Then you have elections, you guys have elections in November. So the problem is it's a catch-22, right? Can the Fed start cutting in September and then pause and then cut again in December to deliver 50 bps which is what the market expects? Or do they cut two days after the election results?"

He continues with his expectations: "We expect to cut in September but it's true that is quite far already and the benefits will be only visible in 2025, so it's a very political loosening cycle that is ahead of us, especially candidate Trump is promising to reheat a bit, the US economy if he gets elected, so the Fed could actually be forced to stop halfway through the loosening cycle and have a very bizarre 2025."
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