What to Expect from the US PCE Data
The upcoming US Personal Consumption Expenditures (PCE) data release, scheduled for 13:30 GMT on Thursday, February 29th, is expected to provide insights into the trajectory of inflation in the United States. Economists anticipate that the report will confirm January’s setback in the battle against rapid cost-of-living increases. Projections indicate a slight moderation in both the year-over-year and month-over-month readings for various components of the PCE Price Index, a key metric closely monitored by policymakers at the Federal Reserve.
Specifically, expectations suggest a marginal decrease in the year-over-year Core PCE Price Index from 2.9% last month to 2.8% for January. The month-over-month Core PCE Price Index is forecasted to increase from 0.2% to 0.4%, signalling an uptick in inflationary momentum. For the overall PCE Price Index, which includes all consumption expenditures, analysts project a slight decline in the year-over-year figures, with expectations of 2.4% compared to 2.6% last month. Month-over-month figures, are expected to increase to 0.3% from last months 0.2%
The PCE measure of inflation holds particular significance for policymakers at the Federal Reserve, who prefer its assessment of inflation trends over the CPI. While both measures typically move in tandem, a recent disparity has emerged, with the PCE showing relatively milder inflation. Against this backdrop, the Federal Reserve has maintained its benchmark interest rate at historically high levels to mitigate inflationary pressures. However, policymakers are awaiting further data indicating a sustained downward trajectory of inflation toward the Fed’s target of 2% annualised before considering adjustments to the interest rate policy. Therefore, the upcoming US PCE data release will be closely watched by economists, policymakers, and financial markets for its implications on monetary policy decisions.
What is US PCE Data
US Personal Consumption Expenditures (PCE) data is a key economic indicator that measures the monthly change in the price of goods and services purchased by consumers in the United States. This data is released by the US Bureau of Economic Analysis (BEA) on a monthly basis. The PCE index encompasses a wide range of consumer spending categories, including durable goods, nondurable goods, and services.
Notably, the PCE index is regarded as the Federal Reserve’s preferred measure of inflation, offering a more comprehensive assessment of price changes than other inflation metrics such as the Consumer Price Index (CPI). The Federal Reserve closely monitors PCE inflation data as part of its dual mandate to achieve maximum employment and price stability. Therefore, the release of US PCE data is highly anticipated by economists, policymakers, and financial markets, as it provides valuable insights into inflation trends and informs monetary policy decisions, including adjustments to interest rates.
