The ‘Core Personal Consumption Expenditures (PCE)’ price index, the preferred price index of the U.S. Federal Reserve, rose 2.8% in January compared to the previous year, meeting the city administration’s forecast. Although this figure meets the Federal Reserve’s policy target of 2%, the rate of increase compared to the previous month is showing signs of a resurgence. New York Stock Exchange futures slightly expanded their gains immediately after the PCE announcement.
On the 29th (local time), the U.S. Department of Commerce announced that the headline PCE price index in January rose 2.4% compared to the previous year, down from December of last year (2.6%). This figure is closer to the Federal Reserve’s policy inflation target than when it peaked at 7% in 2022. Compared to the previous month, it rose 0.3%, the highest since September of last year (0.4%).
The core PCE price index, which the Federal Reserve uses as its policy target, also rose 2.8% compared to the previous year, meeting market expectations. The core price index refers to prices of housing costs, services, and durable goods, excluding highly volatile food and energy prices. Compared to the previous month, it rose 0.4%, consistent with market expectations, but it was the highest level since the second half of last year.
By sector, service prices increased by 0.6% compared to the previous month, and the product sector decreased by 0.2%. On a 12-month basis, services rose 3.9% and products fell 0.5%. There are concerns of sticky inflation in the services sector and deflation in the goods sector.
The data that exceeded the forecast on this day was the increase in personal income. An increase rate of 1% was recorded, far exceeding the expected 0.3%, and expenditures decreased by 0.1%, contrary to the expected 0.2% increase.
With this PCE announcement, Dow index futures, which had been on a downward trend due to the Federal Reserve’s forecast, turned to an upward trend, and Nasdaq index futures, etc., slightly increased their rise. According to the Chicago Mercantile Exchange’s FedWatch, which reflects the interest rate futures market, investors rate the likelihood of a cut in May at about 20% and the likelihood of a cut in June at about 65%.
While market experts are also weighing the possibility of a cut in June, Moody’s Chief Economist Mark Zandi said at a foreign press conference on the 28th, “We will carry out the first interest rate cut in May of this year,” starting with a 0.25 percentage point cut in May and lowering the interest rate every quarter. It is expected that it will be lowered by 0.25% points.
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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.