Core PCE inflation came in at 3.0%, below consensus
The Fed's preferred inflation gauge showed core prices up 3.0% year over year, against a Dow Jones consensus of 3.3% for core and 3.7% for headline.
By BBCorp
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.
Markets in play
- GoldExposure: HighGold prices respond to shifts in US rate and inflation expectations and to moves in the dollar.
- USDExposure: HighInflation data that differs from consensus alters expectations for Federal Reserve policy, a key driver of the dollar.
- US stocksExposure: MediumEquity indices are sensitive to changes in the expected path of US interest rates.
Gold
USD