The latest PCE inflation report has raised concerns about rising inflationary pressures in the U.S. economy. The headline PCE price index increased by 2.7% year-on-year in March, exceeding forecasts of a 2.6% increase. On a monthly basis, the PCE accelerated by 0.3%, unchanged from February. Excluding volatile food and energy components, the core PCE price index remained steady at 2.8% year-on-year, surpassing expectations of a decline to 2.6%. The stronger-than-expected inflation data has further postponed expectations of a Federal Reserve rate cut, with market-implied probabilities now indicating a 60% chance of a rate cut by September 2024 and only one rate cut priced in for the year. The U.S. dollar index initially moved higher following the PCE release, while futures on major U.S. averages rallied in pre-market trading. However, with the Fed’s preferred inflation gauge pushing any rate cut talks further into the future, traders may need to prepare for potential macro-related volatility in the last session of the week.
PCE Inflation Report Surprises, Further Delaying Fed Rate Cut Expectations
