Pre-Corona level… Core PCE increased by 2.9% compared to the previous year
The personal consumption expenditures (PCE) index, a price index favored by the U.S. Federal Reserve (Fed), rose 0.2% in December of last year compared to the previous month, showing that the inflation rate has slowed.
The U.S. Department of Commerce announced on the 26th (local time) that the December PCE price index rose 0.2% compared to the previous month and 2.6% compared to the same month last year.
This is almost the same level as before COVID-19, and is slightly above the Federal Reserve’s inflation rate target of 2%.
The core PCE index, which excludes highly volatile foodstuffs and energy, rose 0.2% from the previous month and 2.9% from the same month last year. It was the smallest gain since March 2021, and economists polled by Dow Jones had expected gains of 0.2% and 3%, respectively.
Consumer spending increased 0.7%, exceeding expectations of 0.5%. The personal income growth rate decreased to 0.3%. The personal savings rate fell from 4.1% the previous month to 3.7%.
Food prices rose 0.1% compared to the previous month, and energy and service sectors rose 0.3%. Prices of durable goods fell 0.4%.
The U.S. economic growth rate for the fourth quarter of last year, announced the day before, was 3.3% per annum, far exceeding market expectations of 2%.
Due to favorable economic indicators, expectations are growing for a successful ‘soft landing’ in which inflation will return to the Federal Reserve’s target of 2% without an economic recession.
The market is paying attention to when the Federal Reserve, which has been aggressively raising interest rates since March 2022 to suppress inflation, will begin lowering interest rates.
The Federal Reserve announced last month that it would cut interest rates this year at the Federal Open Market Committee (FOMC), but did not mention when it would start.
The market expected the first interest rate cut to occur in March, but some Federal Reserve members drew a line at this assumption and said they would be cautious in deciding when to begin the interest rate cut.
The Federal Reserve is scheduled to hold its first FOMC meeting of the year on the 30th and 31st.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.