February 26, 2024 — Inflation Expected to Tick Up


The Personal Consumption Index (PCE) will be released Thursday this week, the Fed’s preferred inflation indicator.  Economists are expecting a core reading, which excludes food and energy, to be up 0.4 percent. That is double December’s 0.2 percent, which means annual inflation will be tracking above the Fed’s 2 percent target.

Markets are still pricing in three rate cuts this year, given the Fed’s latest forecast, down from the hoped for six cuts expected in December. Inflation is proving sticky; comments from Federal Reserve Governor Christopher Waller said last week “at least a couple of more months” of data showing inflation is falling are needed before warranting a rate cut. Inflation must be on a sustainable path back to 2 percent before acting.

The Fed’s next meeting will take place on March 19-20; it is unlikely rates will change before the June meeting, and now 1 in 3 think the FOMC will wait until July.