Reserve

Core

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<p class="has-drop-cap">The latest personal consumption expenditures (PCE) <a aria-label="report (opens in a new tab)" href="https://www.bea.gov/news/2024/personal-income-and-outlays-december-2023#:~:text=From%20the%20same%20month%20one,energy%20prices%20decreased%202.2%20percent." target="_blank" rel="noreferrer noopener nofollow" class="deco-link">report</a> shows a monthly increase of 0.2%. Core PCE, the Federal Reserve’s favorite inflation gauge, rose in line with economists’ expectations, potentially signaling an opportunity to begin <a href="https://tokenist.com/spx-spikes-1-4-as-fed-pivot-sparks-market-optimism/" rel="dofollow" class="deco-link">reducing interest rates</a> earlier than anticipated.</p> 
<h3 id="december-core-pce-up-2-9-year-over-year">December Core PCE Up 2.9% Year-Over-Year</h3> 
<p>The latest data from the Commerce Department revealed a notable easing in inflation towards the end of 2023.&nbsp;</p> 
<p>The department’s personal consumption expenditures (PCE) price index for December, a critical inflation metric watched by the Federal Reserve, showed a modest monthly increase of 0.2% and a year-over-year rise of 2.9% when food and energy are excluded. These figures align closely with the projections of economists surveyed by Dow Jones, who anticipated increases of 0.2% monthly and 3% annually.</p> 
<p>This report marks a slight uptick in core inflation on a monthly basis, rising from <a href="https://tokenist.com/gold-prices-up-1-after-us-pce-data-softer-than-expected/" rel="dofollow" class="deco-link">0.1% in November</a>, but a decrease in the annual rate, dropping from 3.2% to its lowest since February 2021.&nbsp;</p> 
<p>When including the volatile costs of food and energy, the overall inflation also recorded a 0.2% rise for December, maintaining an annual rate of 2.6%. The latter marks the lowest level since February 2021.&nbsp;</p> 
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<h3 id="what-does-this-mean-for-a-soft-landing">What Does this Mean for a Soft Landing?</h3> 
<p>The new PCE data comes a day after the Commerce Department released the most recent gross domestic product (GDP) data, which showed that the US economy <a href="https://tokenist.com/us-economy-grew-faster-than-expected-in-q4-raising-hopes-for-a-soft-landing/" rel="dofollow" class="deco-link">witnessed a 3.3%</a> annual growth in Q4. The expansion is lower than the 4.9% reported in the previous quarter, though still above economists’ expectations.&nbsp;</p> 
<p>During 2023, real GDP grew 2.5%, compared to the consensus projection of 2.4% and the 1.9% seen in 2022.&nbsp;</p> 
<p>The latest economic data released this week suggests a continued, albeit gradual, decline in inflation alongside ongoing resilience in the US economy. This combination is boosting prospects for the Federal Reserve to begin reducing interest rates early and the much-debated “<a href="https://tokenist.com/three-indicators-that-show-promise-for-a-soft-landing/" rel="dofollow" class="deco-link">soft landing</a>.”</p> 
<p>Per the <a aria-label="CME's Fed Watch Tool (opens in a new tab)" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">CME’s Fed Watch Tool</a>, the probability of the Fed reducing rates to between 5% and 5.25% at its March meeting is approximately 46%. For the meeting scheduled on May 1, the likelihood of such a rate cut is slightly higher, at 51.3%.</p> 
<p>In the wake of PCE data, the market response was relatively muted. Stock futures showed little movement at the opening, and Treasury yields were mainly in the red.&nbsp;</p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe> 
<p><strong><em>Do you think the US economy could achieve a soft landing? Let us know in the comments below!</em></strong></p> 
<p><em>Disclaimer: The author does not hold or have a position in any securities discussed in the article.</em></p> 
<p>The post <a rel="nofollow" href="https://tokenist.com/decembers-core-pce-meets-expectations-soft-landing-in-focus/">December’s Core PCE Meets Expectations, Soft Landing in Focus</a> appeared first on <a rel="nofollow" href="https://tokenist.com">Tokenist</a>.</p>

December’s Core PCE Meets Expectations, Soft Landing in Focus

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