The US PCE data revealed that core inflation in the biggest economy in the world came in below estimates in February, bolstering expectations for a more accommodating monetary policy from the Federal Reserve.
The US personal consumption expenditure price index climbed by 5% year-over-year in February 2023, which was the lowest growth since September 2021 and a slowdown from the previously reported downwardly corrected 5.3% gain.
A dip in the Federal Reserve’s favoured inflation indicator, personal consumption expenditures (PCE) boosted the market sentiments.
Wall Street opened higher on Friday, set to close the month and the quarter on a high as investors welcomed a softer-than-expected US inflation reading. Dow is up over 200 points while Nasdaq Composite gained 1% after market open.
PCE data may signal that inflation has peaked while also fueling concern that the Fed’s rate-tightening cycle may soon come to a stop. The Federal Reserve’s rate-hiking programme may be nearing its conclusion is what the market may be concerned about. However, even with the recent volatility in the banking industry, a number of Fed policymakers this week suggested that additional monetary tightening would be necessary to control inflation.
The job market is still strong, according to several strategists, therefore there is no reason for the Fed to ease this year, even though US unemployment claims increased for the first time in three weeks.
According to estimates released today by the Bureau of Economic Analysis, the Personal income increased by 0.3 percent in February. The disposable personal income (DPI) increased 0.5 percent and personal consumption expenditures (PCE) increased 0.2 percent. The PCE price index increased 0.3 percent and excluding food and energy, the PCE price index also increased 0.3 percent.
As investors analysed the most recent economic data for clues on the extent to which the Federal Reserve may still tighten policy, the yield on the 10-year US Treasury note, viewed as a proxy for borrowing costs worldwide, fell to the 3.53% level from the one-week high of 3.59% set on March 28.