This is not good news for expectations of a moderating Fed
The preferred measure of inflation for the Federal Reserve (Fed), the US Core Personal Consumption Expenditure (PCE), in January rose on the month by 0.6%, a faster rate than markets had expected at 0.4% and showed a relatively higher clip year-on-year at 4.7%. This is certainly a higher rate than the Fed would be comfortable with.
Inflation, the primary driver of market sentiment at present, while not as hot as last year, remains pretty warm. This is not good news for expectations of a moderating Fed and an extension of smaller hikes of 25 bps has to be further priced into markets with bonds and equities reacting on the day to the inflation news.
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