During the U.S. session on Wednesday, we have gotten a couple of important economic announcements, including the ADP nonfarm employment change, the core PCE price index number, the final GDP, and the final GDP price index, all coming out of the United States. These are numbers that traders are reacting to as underlying inflation came in below expectations. This is a bit of a surprise, and one that will catch the market’s attention in this environment.
Second-quarter growth was revised a little bit higher, and private-sector hiring has improved. Together, the reports suggest an economy that continues to expand without a corresponding acceleration in the latest monthly core inflation reading. For markets, the central question will be whether or not the balance can persist, allowing the Federal Reserve to contain inflation without imposing additional pressure on growth via rates.