HomeFinancial MarketsPCE Inflation Report Threatens to Delay Fed Rate Cuts

PCE Inflation Report Threatens to Delay Fed Rate Cuts

Investors are bracing for the release of the Personal Consumption Expenditures (PCE) report on Thursday, with markets concerned that hotter-than-expected inflation data could further delay the Federal Reserve’s introduction of interest rate cuts.

Core PCE is set to come in at 2.8% for the month of January on an annual basis, marginally lower than December’s 2.9% reading. On a month-over-month basis, core PCE is set to be 0.4%, up from a 0.2% rise recorded in December. According to Bank of America, these figures are indicative that annualized inflation numbers may rebound above the Fed’s 2% inflation target.

Given that the Consumer Price Index (CPI) and the Producer Price Index (PPI) for January were hotter than expected, there is a risk that PCE could come out higher than expected, Wilmer Stith, bond portfolio manager for Wilmington Trust observed. “I don’t think they’re going to raise rates,” he said of the Fed’s monetary policy. “[But] maybe the Fed walks it back a little bit to two cuts instead of three.”

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