PCE Market Watch
he Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, is set to be released today.
PCE Inflation Forecast
Headline PCE : Expected to rise 2.2%, the lowest since September 2024, indicating progress in the Fed's inflation control efforts.
Core PCE (excluding food and energy): Anticipated at 2.6%, still above the Fed’s 2% target, suggesting persistent underlying inflationary pressures.
Monthly change: Forecasted at 0.1%, reflecting minimal inflation growth for the month.
Key Market Considerations
Tariff Impacts: Recent reinstatement of Trump-era tariffs may exert upward pressure on inflation in the coming months. However, Goldman Sachs projects this effect to be temporary, with core PCE peaking at 3.6% by year-end before subsiding.
Economic Growth: Revised data indicates weaker-than-expected demand in Q1 2025, with GDP contracting at a 0.3% annualized rate, raising concerns about potential stagflation.
Federal Reserve Stance: While inflation shows signs of slowing, the Fed is expected to maintain current interest rates through the summer, with potential rate cuts considered later in the year if economic conditions warrant.
Market Reactions
Gold: Prices have declined, heading for a weekly loss of 1.6%, influenced by a stronger U.S. dollar and anticipation of the PCE report.
U.S. Dollar: Despite a slight uptick, the dollar is poised for its fifth consecutive monthly decline, amid trade and fiscal uncertainties. Reuters
Equities: Markets closed higher on Thursday, buoyed by strong corporate earnings and initial optimism over tariff rulings, but remain sensitive to inflation data and trade policy developments.