The Fed’s Gauge
Following a shortened period of minimal economic releases, Thursday’s trading day brought the sought-after look at price changes throughout the month of January. Previously, inflation measured through the consumer price index found that prices rose 0.3% for the month, slightly above estimates by 10 basis points. However, Wall Street cares to point out that the Federal Reserve’s preferred method to gauge inflation is the personal consumption expenditures index. During January, the core PCE index, which excludes volatile food and energy prices, rose in line with forecasts at 0.4% on the month and 2.8% when compared to a year ago. This annual figure remains above the Fed’s target of 2% but is the lowest reading recorded since February 2021. When including food and energy, headline PCE also rose in line with estimates at 0.3% monthly and 2.4% year-over-year.
Although the figures corresponded with Dow Jones estimates, they do remain elevated from December’s core increase of 0.1% monthly. Several do believe the heightened figures to be seasonal following the holidays, but other analysts have cautioned that stubborn prices could prolong the Fed’s schedules and thwart any near-term rate cut plans. Regardless, other economic data was released on Thursday that may add to a larger picture of the American consumer. Personal income during January rose far higher than expected, increasing 1% on the month after only a forecast of 0.3%. During this time, spending contracted 0.1% after being predicted to grow 0.2%. As the next FOMC meeting approaches, investors should keep an eye on upcoming labor market data to gain a broader understanding of the economy’s strength in 2024.
