Happy Friday.
The US PCE report at 8:30 am ET and pending home sales at 10 am are on the economic calendar today.
The PCE report is the big one as it's the Fed's preferred measure of inflation and it also offers other indications on consumer health. What's expected:
- PCE price index +2.6% y/y
- Core PCE +3.0% y/y
- Personal income +0.3% m/m
- Personal spending +0.4% m/m
A hint on the PCE price index came in yesterday's US Q4 GDP report. The GDP deflator was +1.5% annualized compared to 2.3% expected. That transposes into a couple ticks lower in the PCE price index so I'd suspect the market is priced for 2.4% or 2.5%. Anything lower than that gets awfully close to the Fed's target.
Core is more of a Fed focus at the moment though and the core number in GDP was in-line with estimates, so I don't see any kind of skew there.
For now the market is pricing in 139 bps in easing this year with March around 50/50 for the first cut.
