⚠️US-PCE inflation report for January 2024:
- The PCE (Personal Consumption Expenditures) Price Index is the Federal Reserve's preferred inflation measure, reflecting changes in consumer spending on goods and services
- Ex. REITs (Real Estate Investment Trusts) from FED
📈 Immediate reaction:
- Equity futures 📈
- US dollar 📉
- Bond yields 📉
✨ Core PCE prices rise:
The Fed's preferred inflation indicator, US Core PCE prices, rose 2.8% Y/Y, in line with expectations and slowing from 2.9% in December. This is the lowest annual reading since March 2021.
📉 Headline PCE inflation:
Increase of 2.4% Y/Y, hits estimates, following a 2.6% rise in December. This is also the lowest level since March 2021.
🔢 Monthly changes:
US PCE prices rose 0.3% M/M, in line with estimates. US Core PCE prices also increased by 0.4% M/M, in line with expectations.
🔑 Main finding:
The slowdown in core PCE inflation is good news for the Federal Reserve.
🚀 However...
...US inflation continues to rise much faster than the Fed's target of 2%.
🧐 Core inflation remains stubborn:
It is likely to remain well above the Fed's target for the foreseeable future. The Fed's fight against inflation is therefore far from over.
💡 Perspective:
Contrary to market expectations of a rate cut in June, I believe a cut is unlikely to come until late Q3 as inflation is taking longer than hoped to return to the Fed's 2% target.
Source:
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Digression:
Headline PCE inflation captures all categories of personal spending by measuring the average price change for all goods and services purchased by consumers for consumption purposes. This comprehensive view makes it an important indicator of overall inflation in the economy.
