HomeFinancial MarketsFederal Reserve Receives Positive Inflation Data in PCE Report

Federal Reserve Receives Positive Inflation Data in PCE Report

The Personal Consumption Expenditures index—the Federal Reserve’s preferred inflation gauge—came in at 2.9% for December, beating economists’ estimates. This is the first time since March 2021 that the index has fallen below 3%, prior to the Fed’s most aggressive interest rate hiking campaign since the 1980s.

The “core” index, which excludes volatile food and energy prices, fell to 1.5% on a three-month annualized basis—its lowest since late 2020—while remaining at 1.9% for a second month in a row on a six-month basis. Both measures fell below the Fed’s 2% inflation target.

Given that such inflation figures fall in line with what the Fed would want to hear, some traders are holding onto their optimism that a rate cut is incoming despite indications from some Fed policymakers that the central bank may continue to hold rates constant. Markets are pricing a 46% chance that the Fed will introduce a rate cut in March, a slight drop from the 56% last week.

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