The latest PCE report indicates that core inflation is at the Fed's 2% target on a 3- and 6-month basis, potentially giving the Fed an argument to cut rates. Core inflation, as measured by the Fed's preferred index, rose 0.17% in December, marking the sixth month in the last seven where monthly inflation has met or fallen below the 2% target. While headline inflation matched consensus at 2.01% annualized over the past 6 months and 2.6% year-on-year, leading indicators suggest that the inflation story might not be over. Despite GDP growth accelerating last year, core inflation fell back to the 2% target in annualized terms over the second half of the year. White House economic advisor Brainard noted that the economy is upbeat and inflation is becoming anchored at 2%.
Core inflation eased to the Fed's 2% target in the second half of 2023 — all while the economy saw one of its strongest years of growth this century. @Morning_Joe https://t.co/RlvLaetqDN
The Fed's preferred inflation gauge moved below 3% for the first time since March 2021. The PCE grew 2.6% YoY in December, in line with last month's print. Core PCE, which excludes the volatile food and energy categories, grew 2.9%, below the 3.0% forecast. https://t.co/J6llKTF12o
🔴 WH ECONOMIC ADVISOR BRAINARD: THE ECONOMY IS UPBEAT, INFLATION IS GETTING ANCHORED AT 2%.
“.. hard to say which is more remarkable: that #GDP growth accelerated last year following the Fed’s most aggressive tightening campaign in decades, or that core inflation nevertheless fell back to the 2% target in annualised terms over the second half of the year. Either way, it… https://t.co/nqVWmSXSnC
The two big inflation takeaways from today's PCE report. 1️⃣ Core PCE is at the Fed's target on a 3- and 6-month basis. This is huge. The Fed now has an argument to cut rates. https://t.co/ZWMFtAFBb8
Inflation is a lagging indicator (so is the #Fed). So while it’s good inflation is heading toward 2% the LEADING indicators are accelerating. The #inflation story might not be over. https://t.co/PR9xzM2S0s
Solid data across the board again this morning but still not enough for the Fed to cut in March. Dec PCE headline inflation came in 2.01% annualized over the past 6 months and up 2.6% y/y, matching consensus. Meanwhile, Core PCE inflation was up 1.86% annualized over the past 6… https://t.co/GwdeOfinHF
🔴 CORE INFLATION AS MEASURED BY THE FED'S PREFERRED INDEX ROSE 0.17% IN DECEMBER, AS EXPECTED THIS IS THE SIXTH MONTH IN THE LAST SEVEN WHERE MONTHLY INFLATION HAS PRINTED AT A RATE EQUAL TO OR BELOW THE FED'S 2% TARGET - WSJ'S NICK TIMIRAOS ON TWITTER.