Core PCE Holds at 2.8%—Will Sticky Inflation Delay Fed Rate Cuts?

More Information in our Economic Calendar. PCE Inflation Remains Above Target The PCE price index—a key measure of inflation—rose 0.3% in December from the prior month. Excluding food and energy, core PCE inflation increased 0.2%. On an annual basis, the headline PCE price index was up 2.6%, while core PCE climbed 2.8%, both above the Federal Reserve’s 2% target.

While inflation is gradually cooling, the pace remains stubbornly high, reinforcing expectations that the Fed will maintain a cautious stance on interest rate cuts. Traders will be closely monitoring upcoming economic data and Fed statements for further policy signals.

Market Outlook: Fed Policy Uncertainty Keeps Traders on Edge With PCE inflation still above the Fed’s target and consumer spending showing resilience, expectations of aggressive rate cuts may weaken. If inflation remains sticky, the Fed could delay or reduce the number of expected rate cuts this year. This would likely support the U.S. dollar and pressure risk assets, particularly equities.

Traders should watch for upcoming inflation reports and labor market data, as any signs of persistent price pressures could shift market sentiment. Until then, the outlook remains cautious, with rate-sensitive assets particularly vulnerable to shifting expectations.