Green bags: Watch the Fed’s magnifying glass on the PCE; This is what the market expects

By: News Team

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the Fed's magnifying glass on the PCE

European markets in green this Friday -Ibex 35, CAC 40, DAX…- waiting for another of the key data in the United States that the US Federal Reserve (Fed) looks at with a magnifying glass: the PCE (personal consumption price index).

“In principle, it is expected that both the PCE as your underlying have moderated slightly in January relative to their December level. If this is the case, and what was expected by the consensus of analysts is fulfilled or even improved – the year-on-year growth rate of the PCE of 4.9% (5.0% in December) and its underlying rate of 4.3% (4.4% in December) – we understand that investors will react positively, “they explain in Link Securities.

“Conversely, readings above the consensus estimate will lead to further cuts in European and U.S. bond and equity markets,” these analysts add.

“The PCE could continue to moderate in January, although the risk is to the upside, in line with what happened last week with the CPI and producer prices”, they point out in Renta 4 (BME:RTA4).

“The market suspects that inflation is sticky – the consensus expects the US Consumer Deflator/PCE to repeat at +5.0% in January with Core at +4.3% vs 4.4% previously. With the PCE far from the formal objective (~2.0%), the fear is growing that the Fed tightens monetary policy more than expected: higher rates for quite some time?”, warn Bankinter (BME:BKT).

“Along with the readings of the PCE will also be announced the evolution of the revenue and Personal expenses in January in the US, figures that will serve to give us a more concrete idea of the strength that private consumption, a key variable of US GDP, is currently going through, and which can continue to show”, they conclude in Link Securities.

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