Bloomberg Surveillance PCE and the US Economic Outlook
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Aug 29, 2025 Michael McKee, Bloomberg News' International Economics & Policy correspondent, delves into pressing economic issues. He discusses PCE trends and the implications for inflation, labor, and potential Fed rate cuts. The conversation also covers the intricate relationship between tariffs and U.S. economic dynamics, highlighting consumer behavior amid changing prices. McKee further analyzes the euro-dollar exchange rate's future and shares insights on emerging markets and their resilience amidst global economic shifts.
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Why The Fed Prefers PCE
- PCE covers out-of-pocket spending plus items paid on behalf of consumers, making it broader than CPI.
- The Fed prefers PCE because it captures larger weights like health-care insurance and employer-paid items.
Early Signs Of Inflation Reacceleration
- Inflation is reaccelerating modestly now after inventory-driven softness this summer.
- Morgan Stanley expects a mild pickup (roughly 0.3% monthly) with more pressure in coming months.
Tariffs And Dollar Move Inflation U.S.-Side
- Tariffs are shifting costs onto U.S. businesses who then pass them to American consumers.
- A weaker dollar further amplifies U.S. inflation relative to trading partners.