The core personal consumption expenditures price index, one of the feds favorites indexes to track inflation, has seen a increase from the previous month and an overall increase from year-to-date. The PCE is a metric that tracks how much earned income of households in the US spend on current consumption of various goods and services. There are two measurements of the PCE, one including volatile food and energy cost and one the does not include those prices. When you include the volatile prices of food and energy, the PCE rose 0.2% from the previous month and saw a 2.9% increase from year-to-date. Without the volatile prices, PCE still rose by 0.2% on the month but saw an increase of 2.6% from year-to-date. This grew in tandem with consumer spending increasing 0.7%, which is more than the estimated 0.5%. With the release of these numbers, the futures market is still expecting the Fed to make the first rate cuts in March, with future traders saying there is about a 53% chance it will happen.
Link: https://www.cnbc.com/2024/01/26/pce-inflation-december-2023-.html
3 comments:
It was quite interesting noticing how GDP growth was accelerated last year even though the Federal Reserve had pushed the interest rates higher to tighten and slow down the economy. Now that inflation is cooling, makes sense that markets would expect that the Federal Reserve reverse its tightening policy.
How might the recent increases in the core personal consumption expenditures price index impact the Federal Reserve's decision-making regarding potential rate cuts in March, and what factors could influence the trajectory of inflation and consumer spending in the coming months?
This relates to the article I read in that despite the Fed's efforts to combat inflation it continues to rise and the economy continues to grow. It seems that this recent data will cause the Fed to delay their plan of lowering interest rates, but I wonder how long this delay will end up being.
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