Proactive Investors - Investors will have their eye on some economic data due to be released on the Good Friday holiday that could provide some direction on the future direction of interest rates.
The Personal Consumption Expenditures (PCE) is a measure of the amount spent by households and individuals on goods and services in an economy.
An important indicator used by economists and policymakers to assess consumer spending patterns and overall economic activity, the PCE includes expenditures on a wide range of items such as food, clothing, housing, transportation, healthcare, and recreational activities.
And with PCE data closely monitored by central banks, governments, and financial analysts, this month’s release could provide valuable insights into consumer behavior and economic trends.
Some economists anticipate a 0.4% increase for February, which would mark the second consecutive month of expected price hikes.
That would pose a challenge for central bank officials as they navigate interest rate decisions amidst mounting inflationary pressures.
Economists predict that the PCE report will also reveal a year-over-year inflation rate of 2.5% for February, slightly higher than January's 2.4%. This persistent uptick in consumer prices underscores the dilemma facing Federal Reserve policymakers as they weigh the timing of potential interest rate cuts.
Others expect the PCE to remain stable at 2.8% year-over-year. Current projections show a slim chance of a step down in the cost of borrowing at the May meeting but a significantly higher likelihood in June, following a shift in the odds from 59% to 73%.
"A PCE number in line with expectations will help bolster Jerome Powell’s talk that we are 'close' to a rate cut,” Freedom Capital Markets chief global strategist Jay Woods wrote earlier this week.
"As for the Fed, we consistently get the same narrative but it keeps working," Woods noted. "This seems to mean that boring and predictable commentary from Jerome Powell will remain music to the market's ears and keep this rally alive."
While the Fed has indicated a forthcoming rate adjustment, officials emphasize the importance of data in informing their decisions. A cautious approach is evident as policymakers await further inflation data before committing to any definitive action.