US Jan PCE Price Index Annual Rate Below Forecast, Traders Bet Fed Will Cut Rates Before September

TradingKey - U.S. PCE data released at 8:30 AM ET on March 13 showed that U.S. inflation indicators were generally moderate. According to data released by the Bureau of Labor Statistics, the U.S. Personal Consumption Expenditures (PCE) price index rose 2.8% year-over-year in January, lower than the market expectation of 2.9%, while core PCE growth was largely in line with expectations.

Specifically, overall inflationary pressure eased at the beginning of the year, but the market reaction was relatively muted. As one of the inflation indicators most closely watched by the Federal Reserve, PCE data is generally regarded as an important reference for judging the path of monetary policy. Analysis suggests that the guidance provided by the January data for future policy decisions may be limited.

The market is currently more focused on the upcoming PCE data for February and March. With the situation in the Middle East continuing to escalate, energy market volatility has intensified significantly, and international oil prices spiked at one point, leaving global energy prices facing new upward pressure. Against this backdrop, rising energy costs may gradually pass through to the consumer side in the coming months, thereby pushing inflation levels back up.

At the same time, it is widely believed in the market that energy price shocks resulting from geopolitical conflicts often have a lag. Historical experience shows that it usually takes weeks to months for crude oil price increases to be fully reflected in consumer price data. Therefore, even if inflation data for January was moderate, PCE indicators for the coming months may still face the risk of trending upward again.

As a result, traders remain cautious regarding the path of monetary policy, expecting the Federal Reserve to cut interest rates by September; previously, the market had significantly scaled back expectations for rate cuts within the year. The market will closely monitor inflation data over the next two months to determine whether rising energy prices will exert a new impact on the overall U.S. inflation trend.