US consumer spending price index lowest in 3 years… Inflating expectations of interest rate cuts

As of 3 months, the core PCE price index increase rate is 3.5%.
Jump from the existing 2%… Concerns about rising inflation remain

The personal consumption expenditures (PCE) price index, a price index monitored by the U.S. Federal Reserve, rose 2.5% in February compared to the previous year. The core PCE price index increase rate was 2.8%, the lowest in the past three years.

The PCE price index increase rate announced by the U.S. Department of Commerce on the 29th (local time) was 2.5% compared to the previous year and 0.3% compared to the previous month. The increase rate compared to the previous month was slightly lower than market expectations (0.4%). The core PCE price index, excluding highly volatile energy and food prices, was 2.8% compared to the previous year, which was also consistent with the market outlook. This is the lowest core PCE inflation rate in the past three years. Compared to the previous month, it rose 0.3%.

Overall, there was no ‘surprising’ news, but consumer spending increased significantly, suggesting the possibility of additional inflation pressure. Personal income increased by 0.3%, but expenditures increased by 0.8%, significantly exceeding the expected 0.5% increase. It is also pointed out that it is a cause for concern that the PCE price index increase rate over the past three months has jumped to 3.5% from the previous 2% range.

In the United States, inflation has been ‘sticky’ this year and has not been able to come down easily, and the possibility of it rising again has been raised, so the market’s attention has been focused on whether this will affect the timing of the Federal Reserve’s interest rate cut. At a press conference after the Federal Open Market Committee (FOMC) on the 20th, Federal Reserve Chairman Jerome Powell said, “The overall story that the U.S. inflation rate is falling has not changed,” and said he would wait and see whether the hot price indicators were a one-off or continuous.

However, a week later, Federal Reserve Director Christopher Waller made hawkish remarks, saying, “There is no need to rush to cut interest rates,” and that if the rate cut is delayed, the extent of the rate cut will also be affected. He added, “It is appropriate to reduce the overall reduction in line with recent data.”

On this day, the New York Stock Exchange was closed in observance of Good Friday, the Friday before Easter. According to the Chicago Mercantile Exchange’s FedWatch, policy interest rate futures investors estimate the likelihood that the Federal Reserve will cut interest rates by June immediately after the PCE announcement in February is about 64%.
New York = Correspondent Kim Hyun-soo [email protected]