2/29/2024: Core PCE was up 0.4% in January
The January PCE report was out this morning. Headline PCE went up 0.3% while core PCE went up 0.4% MoM in January. Core PCE inflation is the 2% target the Fed is trying to optimize for. Core PCE continues to trend down on an annualized basis and is now at 2.8% YoY. But it’s a bit worrisome that the core PCE was up 0.4% in January. At the beginning of the year, investors are expecting six rate cuts starting this March. But it appears that investors have tempered their expectations due to the strong jobs report and the hotter than expected inflation report. I wonder what will happen if the inflation heats up again. Is the Fed still going to cut rates or will they hold the rate steady or even raise rates?