PREVIOUS TRADING DAY EVENTS 31 August 2023

U.S. consumer spending increased and is on track to drive thirdquarter GDP growth. According to the release yesterday, The Real inflationadjusted Personal Consumption Expenditures PCE spending jumped 0.6 in July. Real Disposable Personal Income DPI declined 0.2. Other reports brought to light that there was a decline in firsttime applications for unemployment benefits last week.

The slowing monthly inflation rates cemented expectations that the Federal Reserve would keep interest rates unchanged next month.

Americans keep spending, said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. The soft landing view still holds, but there are some warning signs coming from the consumer as the savings rate continues to tick down.

Inflation as measured by the personal consumption expenditures PCE price index rose 0.2 last month, matching Junes gain.

But make no mistake, the monthly sequential momentum around 0.2 is exactly what Fed policymakers are looking for to get inflation back toward the 2 target, said Gregory Daco, chief economist at EYParthenon in New York.

Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.255.50 range. Financial markets expect the U.S. central bank will leave its benchmark overnight interest rate unchanged at its Sept. 1920 policy meeting.

The Fed has to see substantial disinflation in core services before it can consider letting its guard down…