Core PCE inflation came in at 3.0%, below consensus

What happened

The personal consumption expenditures price index, the inflation measure the Federal Reserve favours, showed core prices rising 3.0% from a year earlier. That was well short of the Dow Jones consensus, which had looked for a 3.3% annual increase in the core reading.

Economists surveyed by Dow Jones had also projected a 3.7% annual gain on the headline PCE measure, which includes food and energy prices.

Why it matters

Core PCE strips out food and energy and is the gauge the Federal Reserve points to when judging progress on its inflation target, so a reading that differs from forecasts tends to reshape expectations for the path of policy rates. Those expectations feed straight into Treasury yields and the dollar.

Gold, which pays no yield, is sensitive to shifts in real interest rate expectations and the dollar. Equity indices and crypto are also exposed, since both respond to changes in perceived funding conditions. Dollar-denominated oil can react through the currency channel as well.

What to watch

Attention stays on the Federal Reserve's reading of price pressures, including remarks from policymakers and the next updates to the PCE and other inflation gauges cited in the consensus forecasts.