Source: Golden Ten Data
PCE data is mixed. This indicator that the Federal Reserve is closely watching unexpectedly accelerated, and traders now believe that the possibility of cutting interest rates in March is less than 50%.
One of the Federal Reserve's favorite inflation indicators released on Friday shows that as 2023 comes to an end, the rate of price growth is still slowing down.
At 21:30 Beijing time, the US core PCE price index recorded an annual rate of 2.9%, a new low since March 2021, lower than the forecast of 3%, and the previous value was 3.2%; the monthly rate of the US core PCE price index for December recorded a monthly rate of 0.2%, a new high since September 2023, in line with expectations of 0.20%, up from the previous value of 0.10%.
The monthly rate of personal spending in the US recorded 0.7% in December, a new high since September 2023, exceeding expectations of 0.4%. The previous value was revised up from 0.2% to 0.4%.
After PCE data was released, US short-term interest rate futures fell, and traders reduced their bets on the Fed cutting interest rates. Interest rate futures traders continue to believe that the Fed is most likely to cut interest rates for the first time in May, and that the probability of cutting interest rates for the first time in March is slightly less than 50%.
The yield on US 10-year treasury bonds rose to 4.135%, driving up the US dollar index in the short term, but then regained all gains; spot gold fluctuated sharply in the short term and has now almost returned to the level before the data was released.
The annual growth rate of the basic inflation indicator favored by the Federal Reserve is the slowest in the past three years, further proving that although inflation is still high, it continues to decline. This may give the Fed the green light to start cutting interest rates later this year. The three-month and six-month annualized core and overall PCE are now below the Federal Reserve's target.
Forexlive analysts pointed out that yesterday's weak overall inflation data in GDP data triggered widespread speculation about the decline in overall PCE in December. However, inflation in the service sector excluding energy and housing, which the Federal Reserve is closely watching, rose 0.3% month-on-month, an acceleration from 0.1% last month. This weighed on the market's expectations of interest rate cuts and may help boost the dollar.
An agency commented on the monthly rate of US personal spending, saying that American consumers continue to show resilience, which may keep the Federal Reserve on hold for a longer period of time. Prior to this morning's data release, all the focus was on PCE inflation. These figures are generally in line with expectations. Among them, the 2.9% core PCE price index has an annual rate slightly better than expected, which will help reduce inflation. However, what is popular is consumption. Consumption increased sharply this month, and last month's data has improved somewhat.
Peter Cardillo, chief market economist at Spartan Capital Securities, also believes that strong personal spending will keep the Federal Reserve on hold and be cautious about cutting interest rates as soon as possible. He believes that the first rate cut may occur in the middle to late third quarter. The PCE data is good. Inflation is below 3% year over year, which is reassuring because the inflation rate is moving towards the Federal Reserve's 2% target. Combined with yesterday's GDP data, the report strengthens the possibility of a soft landing, which continues to receive support.
Editor/Corrine