#PCEInflationWatch Economists generally expect core PCE inflation to continue falling in the months ahead, though sticky services prices still exert upward pressure on the index.

Senior US economist Preston Caldwell is looking for the core PCE inflation rate to drop as low as 2.2% by March, provided we don’t see another spike in inflation, as we did in the first quarter of 2024.

When Will the Fed Cut Rates?

The Fed held rates steady at its first meeting of the year on Wednesday afternoon, in a move that was no surprise to markets. In a statement, the central bank’s policy-setting committee noted that “inflation remains somewhat elevated.”

With the economy still growing and the labor market showing no signs of cracking, central bankers have room to wait for more evidence of cooling price pressures before making another move to cut rates.

“It’s a very rational and reasonable view to remain on pause,” Price says, citing strong consumers, healthy labor market data, and robust economic growth. He expects to see the next quarter-point rate cut at the June meeting.

Some strategists have even suggested that after cutting rates by a full percentage point last fall, the Fed will not cut rates again at all this cycle. “The labor market is stabilizing around full employment and inflation is stuck modestly above target,” economists from Bank of America wrote in a note to clients earlier this month.

Key Takeaways-

1. Friday’s PCE report is expected to show a relatively hot headline number, alongside improvement on the core measure of inflation, which excludes volatile food and energy prices.

2. Economists expect PCE inflation to keep falling toward the Federal Reserve’s 2% target over the next few months.

3. The Fed is expected to hold interest rates steady until midyear.

What are your thoughts and expectations regarding the upcoming PCE Inflation.?