Analysis: Tonight's PCE May Show Unprecedented Anomalies in Decades, Another Hurdle for Fed's Rate Cut Path

Odaily News At 8:30 PM Beijing time on Friday, the United States will release the January PCE Price Index. The market expects the PCE data to rise 2.9% year-on-year, unchanged from the previous value, with a month-on-month increase of 0.3%, slowing down from last month's 0.4%. On the core front, the market anticipates the year-on-year growth rate of the core PCE Price Index to accelerate slightly to 3.1%, marking the largest increase since April 2024, while the month-on-month increase is expected to remain unchanged at 0.4%. As the "ace" data from the U.S. Bureau of Economic Analysis, the PCE Price Index directly references CPI data for several price categories. Following the release of the latest CPI data, economists quickly revised upward their forecasts for the February core PCE Price Index, which will be released on April 9th. Several economists expect the index to rise 0.4% for the second consecutive month, with some even bracing for a larger increase.

The Trump administration has already seized on the CPI report, claiming price pressures are under control and the Fed should cut rates significantly. Meanwhile, hawkish voices within the Fed point to the PCE indicator, arguing that inflation remains a full percentage point above the policymakers' 2% target. Economists at Bank of America also directly noted that while the CPI data was moderate, PCE inflation does not provide a stronger case for rate cuts, especially considering the upside risks from oil prices. This puts the Fed in a genuine dilemma. Softening in the labor market should provide support for rate cuts, but if PCE remains persistently strong and energy and food price shocks from conflicts arrive simultaneously, officials will find it difficult to justify restarting the easing cycle. (Jin10)