The Fed's preferred inflation indicator will be released on Friday, and here's what to anticipate.

• On Friday at 8:30 a.m. ET, the Commerce Department will publish its personal consumption expenditures price index.
• The Dow Jones consensus predicts minimal fluctuations in recent trends, with monthly increases of 0.2% in both headline and core prices, and annual gains of 2.5% and 2.7%, respectively.
• Even though policymakers seem to be preoccupied with other matters, the report may still impact the September rate decision.

On Friday, Federal Reserve officials will examine their preferred inflation indicator, which could impact the September rate decision, despite policymakers appearing to be preoccupied with other matters.

The Commerce Department will release its personal consumption expenditures price index at 8:30 a.m. ET, which is a comprehensive measure of the prices consumers pay for various goods and services, as well as their spending preferences.

The PCE index is the Fed's primary indicator for measuring inflation and forecasting future rates, with policymakers focusing on the core measure that excludes food and energy.

The PCE is preferred by the Fed over the Labor Department's CPI because it considers consumer behavior changes, such as substituting purchases, and is more comprehensive.

The July reading for the Dow Jones consensus predicts a slight increase in core prices, with respective gains of 2.5% and 2.7% annually. However, the all-items measure remains the same.

If the readings align with the forecast, it will not significantly affect Fed officials' decision to reduce interest rates during their Sept. 17-18 meeting.

"According to Beth Ann Bovino, chief economist at U.S. Bank, any slight upticks in inflation readings are "really just base-effect kinds of things that aren't going to change the Fed's view.""

Though recent statements suggest a more positive outlook, fed officials have not yet declared victory over inflation, which the central bank aims to keep at an annual rate of 2%.

Since February 2022, the respective PCE readings haven't been below that level. However, Fed Chair Jerome Powell last week stated that his confidence has grown that inflation is heading back to target. Despite this, Powell expressed some reservations about the slowing labor market, and it seems the Fed is now shifting its focus from being an inflation fighter to supporting the jobs picture.

Powell stated that the risks to inflation have decreased, while the risks to employment have increased.

The belief that policymakers will prioritize preventing a labor market reversal and a broader economic slowdown suggests that they may pay less attention to economic indicators such as Friday's PCE reading and more to the Sept. 6 report on August nonfarm payrolls.

"Bovino stated that the focus of the Fed will be on the jobs front, as they appear to be more attuned to the weakening of the jobs side. He believes that this will be the focus of their monetary policy."

On Friday, inflation readings will be examined, along with an evaluation of personal income in July, predicted to increase by 0.2%, and consumer spending, projected to increase by 0.5%.