May core PCE printed 0.16% month-over-month Friday, two basis points under the 0.18% hold line the Thursday preview flagged and one tick under the 0.17% supercore-mapped estimate the curve carried out of the June 13 week-recap. Year-over-year core PCE rolled to 2.5% from 2.6%, the lowest reading since spring 2024. Three-month annualized core landed at 2.3%, the softest print on that frame since February. Fed-funds futures closed the week with the September 17 cut probability at 93%, up from 88% at the prior Friday close and 86% at the Thursday open. The next four sessions compress the June jobs sequence into the window between Monday June 29 and Thursday July 2, with nonfarm payrolls shifting to Thursday ahead of the Independence Day observance on Friday July 3.

The PCE print

The 8:30 ET release ran inside the soft side of the base-effect window the Thursday preview laid out. The headline lines:

  • Core PCE month-over-month: 0.16% (consensus 0.17%, prior 0.18%).
  • Core PCE year-over-year: 2.5% (prior 2.6%).
  • Headline PCE month-over-month: 0.14% (prior 0.15%).
  • Headline PCE year-over-year: 2.3% (prior 2.3%).
  • Supercore (services ex-housing) month-over-month: 0.21% (prior 0.27%).
  • Supercore three-month annualized: 2.9% (prior 3.2%).

The supercore line is the cleaner read. The 0.21% month-over-month print rolled the three-month annualized through the 3.0% threshold the Committee has watched as the marker for services normalization. The last time the three-month supercore window printed under 3.0% was the September 2024 release window. Healthcare services at 0.14%, transportation services at 0.19%, and portfolio management fees at 0.03% delivered the lines the June 13 PPI crosswalk estimated within two basis points each.

The goods side stayed quiet. Core goods ex-used vehicles at 0.08% ran below the 0.20% to 0.30% band the supply-chain reset has been working through, and used vehicle prices at negative 0.4% added a small drag. Housing services at 0.27% held the OER deceleration path from the May CPI release. The combination put the services-goods split in the cleanest configuration the Committee has seen since the December 2024 print.

Where the strip moved

Fed-funds futures repriced through the 8:30 to 9:30 window Friday. The September contract moved from 96.42 at the Thursday close to 96.48 at the Friday close, mapping the September cut probability move from 88% to 93%. The December 2026 contract added a second cut at 41%, up from 34% at the prior Friday close. The terminal rate read off the December 2027 contract rolled to 3.31%, four basis points lower on the week.

The Treasury curve moved in line. The 2-year yield closed at 3.94%, down six basis points on the week. The 10-year yield closed at 4.14%, down five basis points. The 30-year yield closed at 4.68%, down one basis point. The 2s10s slope held at 20 basis points, the same level it carried into the FOMC week. The 5s30s widened a basis point to 33. A front-end-led rally with a stable long bond is the curve configuration that maps to a dovish Fed read without forcing a duration repricing on the back end.

The jobs week ahead

Independence Day falls on Saturday July 4. The federal observance shifts to Friday July 3, which closes equity markets and the bond market full session. Nonfarm payrolls for June, normally a first-Friday release, shifts to Thursday July 2 at 8:30 ET. The four-session window:

  • Monday June 29: Dallas Fed Manufacturing Index at 10:30 ET.
  • Tuesday June 30: Case-Shiller 20-city at 9:00 ET, MNI Chicago PMI at 9:45 ET, Conference Board Consumer Confidence at 10:00 ET, JOLTS May at 10:00 ET.
  • Wednesday July 1: ADP June at 8:15 ET, ISM Manufacturing June at 10:00 ET, Construction Spending May at 10:00 ET, FOMC minutes at 2:00 ET.
  • Thursday July 2: Jobless Claims at 8:30 ET, Trade Balance May at 8:30 ET, Nonfarm Payrolls June at 8:30 ET, ISM Services June at 10:00 ET, Factory Orders May at 10:00 ET.

The JOLTS print Tuesday is the read with the cleanest mapping to the cut-pricing question. April openings at 7.39 million and the quits rate at 2.1% held the labor market at the level the Committee has been calling soft normalization. A May openings print under 7.3 million with a quits rate at or under 2.0% would line up with the labor-market loosening the cool inflation prints have been pricing into the cut path.

The June payrolls print Thursday is the variable that decides whether the September cut probability holds the 93% the week closed at. The April nonfarm payrolls print at +128k and the May print at +139k ran below the +150k consensus on both releases. A June print under +130k with unemployment ticking to 4.3% would push the September probability through 95% and start adding probability mass to the July cut. A print above +180k with unemployment holding at 4.2% would walk the September probability back toward the 80% level the curve carried before the cool CPI sequence.

The FOMC minutes Wednesday at 2:00 ET are the secondary read. The June 18 statement kept the two-cuts-in-2026 median on the dot plot, with the 2027 median holding at three cuts. The June 18 press conference ran the risk-balanced framing Chair Powell has carried since the March meeting. The minutes will show whether the eight participants who held the above-3.5% longer-run dot softened that position with the cool May print in hand, or whether the Committee’s right tail held.

What carries into Q3

The June 27 close locks in the configuration the third quarter opens on. Core PCE three-month annualized at 2.3% sits inside the 2.0% target range for the first time since the 2022 inflation cycle. Supercore three-month annualized at 2.9% sits under the 3.0% threshold the Committee has read as the services normalization marker. The September cut probability at 93% is the highest level the curve has carried into a July open since the 2019 cycle.

The variables that could move that configuration: an upside surprise on June payrolls, a JOLTS openings rebound above 7.5 million, or a June CPI print on July 11 that breaks the three-print soft sequence. The variables that could harden it: a payrolls print under +120k, a JOLTS openings print under 7.2 million, or a June CPI core month-over-month under 0.20%. The July 30 FOMC is the next decision date, four weeks from Monday.