Data released on Friday indicated that the USA's PCE and Core PCE figures fell below expectations.

In November, the PCE price Index in the USA recorded a year-on-year rate of 2.40%, lower than the expected 2.50%, and higher than the previous value of 2.30%; the month-on-month rate was 0.10%, lower than the expected 0.20% and lower than the previous value of 0.20%.

Excluding the volatile food and Energy components, the USA's November Core PCE price index annual rate recorded 2.80%, lower than the expected 2.90%, and unchanged from the previous value; the monthly rate recorded 0.10%, lower than the expected 0.20%, and lower than the previous value of 0.30%.

Traders continue to bet that the Federal Reserve will pause interest rate cuts in January of next year and have increased bets that a rate cut will happen in March, with an expected 30% chance of another cut in October.

After the data was released, the declines in the three major US stock index futures significantly narrowed.

New York Fed President Williams stated that he sees encouraging economic news, but the path to combating inflation is not smooth. Inflation in the USA has significantly declined in the past two years, and the Federal Reserve will ensure that the inflation rate reaches 2%; Fed officials hope the anti-inflation process will continue, but there is a lot of uncertainty; currently, monetary policy is "well positioned" and somewhat restrictive. Mortgage rates are expected to fall.

He stated that the model-estimated long-term real neutral interest rate is 0.75%. Higher productivity may slightly increase the neutral rate. Over time, the neutral rate may have changed significantly. The Federal Reserve's current policy is "quite restrictive."

Williams noted that the Federal Reserve has considered the impact of future fiscal policy. He remarked that recent data aligns with the Fed's economic forecasts, indicating a healthy economic state. Economic growth is expected to slow to around 2% next year. There is significant uncertainty in future fiscal policy, including the potential for some form of tariffs, and the Federal Reserve has incorporated some thoughts on trade and immigration, anticipating that the slowdown in labor force growth will continue.

So far this year, inflation has slowed down but remains stubbornly above the Federal Reserve's annual target of 2%, pressured by monthly "core" price increases exceeding expectations in recent months. According to the latest economic projections from the Federal Reserve's Summary of Economic Projections (SEP), the Fed anticipates the core inflation rate will peak at 2.5% next year, up from the 2.2% forecast in September, and then decrease to 2.2% in 2026 and 2.0% in 2027.

Federal Reserve Chairman Powell stated at a press conference following the interest rate decision on Thursday that the last mile of curbing inflation is more challenging than initially expected. "We have an estimate for inflation by the end of the year, but as the end of the year approaches, that estimate has somewhat missed the mark," Powell said. "I can tell you, this might be the biggest factor - inflation is again falling below expectations."

Trump's election as the next president of the USA has increased this uncertainty, with some economists believing that if Trump fulfills his key campaign promises, the USA may face another surge in inflation.

Policies proposed by Trump, such as imposing high tariffs on imported goods, reducing taxes on businesses, and restricting immigration, are viewed by economists as potential sources of inflation. These policies could further complicate the Federal Reserve's future path on interest rates.

Powell indicated on Thursday that the Federal Reserve expects "significant policy changes," but he warned that the extent of policy adjustments remains uncertain.

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Editor/rice