PCE Continues Rate Cut Expectations

PCE Inflation in Line with Forecasts 

Friday’s Personal Consumption Expenditures (PCE) report for July came in as the market expected. The headline inflation showed a rise of 0.2% to an annual level of 2.6%. Core inflation, stripping out volatile food and energy prices, rose 0.3% to an annual level of 2.9%.   

Remember, PCE is the Federal Reserve’s (Fed) favorite inflation report. This continues the narrative that tariff-fueled inflation isn’t materializing and supports the likelihood of a rate cut at the Fed’s September meeting.   

Upcoming Jobs Reports Could Confirm Weakness 

Two additional reports are coming before the next Fed meeting: the August Bureau of Labor Statistics (BLS) Jobs report on September 5 and the BLS 2025 Q1 Quarterly Census of Employment and Wages (QCEW) on September 9.   

Last month’s Jobs report was abysmal and finally materialized the weakness that has been festering in the labor economy. It also contained massive revisions lower to prior months’ data.  

Danielle DiMartino, CEO and Chief Strategist at QI Research LLC, noted that the state-provided employment numbers show a loss of 65,000 jobs in June.  

It is very plausible that this next reading could see negative monthly jobs data for June. This would be the first monthly negative jobs reading in the BLS report in almost five years.   

QCEW May Reveal Job Revisions Again 

The last QCEW report in June showed revisions of over 600,000 fewer jobs than the BLS reported. There is a strong likelihood that the September 9 report will also show additional job revisions lower. It is possible we could see several negative months.  

Given these high probabilities, the current projection is an 87.1% chance for a rate cut at the Fed’s September meeting. 

Fed Governor Cook Faces Legal Uncertainty 

The drama continues with Fed Governor Lisa Cook. President Trump formally fired her this week, but she has refused to leave. Those of us in the real estate industry understand that mortgage fraud is real and serious. If the allegations turn out to be true, it will be hard to argue that she should remain as a regulator of the very institutions she may have defrauded and is supposed to regulate. Federal law provides for the essential independence of the Federal Reserve from political influence. The whims of politicians should not change the monetary policy of the country.  It cannot sacrifice the nation’s long-term stability and growth for short-term, immediate improvements. That said, federal law also provides for the removal of a governor “for cause.”  This will clearly be decided in the courts.  

At the time of this writing, Governor Cook has not refuted the claims of mortgage fraud, but has said that a clerical error may have occurred.   

Looking Ahead 

Next week is Jobs week again, with many labor reports to keep an eye out for: 

Monday, September 1 

  • Markets Closed for Labor Day 

Wednesday, September 3 

  • Job Openings and Labor Turnovers (JOLTS) 

Thursday, September 4  

  • ADP Employment Report 
  • Initial and Continuing Jobless Claims 

Friday, September 5 

  • BLS Jobs Report for August 

We wish you and your family a wonderful holiday weekend! 


The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 08/28/2025.