The Fed’s preferred measure of inflation is expected to ease further

Yesterday, we got another good report as the US PPI missed expectations by a big margin making the market to fully price back two rate cuts by the end of the year.

Forecasters can reliably estimate
the PCE once the CPI and PPI are out, and the intial estimates show that Core PCE M/M is expected at 0.13%, while the Y/Y figure is seen at 2.6% vs. 2.8% prior. This is already below the Fed’s forecasts of 2.8% Core PCE Y/Y for 2024.

Moreover, we got a miss in jobless claims with initial claims “spiking” to the highest level since August 2023. Now, this might have been just a blip as George Pearkes, analyst at Bespoke Investment Group, pointed out below.

So, if the risk sentiment soured due to the higher claims, then it might be wrong footed. Moreover, one week doesn’t make a trend and we have already experienced such spikes that eventually were revised a week later. So, although we shouldn’t be complacent, we can’t even base everything on just one jobless claims report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.