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US Core PCE rises in line with forecasts

Fed’s preferred inflation measure is still not giving a green light to near-term interest rate cuts.

29 February 2024

US Core PCE - the preferred Federal Reserve (Fed) measure of inflation - rose 0.4% month-on-month in January. This corresponds to a 2.8% rate of inflation over the year, very much in line with analysts’ forecasts. At this current level, PCE has almost halved from the extreme inflation shock of 2022, but it has taken a long time to come down. For this reason the Fed has been cautioning that the final mile of their inflation targeting policy will be prone to cautious assessments on when to deliver their first cut in rates.

Core PCE is obviously a lot closer to their 2% target than it has been in some years, but it does not necessarily mean that suddenly the green lights for rate cuts are glowing, especially as in the very short term the figure has started to go up again (six-month inflation averages are higher now than they were in November last year). June is the market’s assessment of when the Fed will pull the trigger but it remains an uncertain bet to take.

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Charles Hepworth

Investment Director
My Insights

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