Emre Yumlu 
A critical indicator of the US economy, the Core Personal Consumption Expenditures (PCE) Price Index, has been released! What do the figures show?
What Is the Core PCE Price Index?
The Core PCE came in at 2.5% year-over-year. This figure is fully in line with market expectations and indicates a slight decline compared to the previous reading of 2.7%.
The fact that it is getting closer to the Fed’s inflation target of 2% shows that the tight monetary policy is having an effect. Especially during a period of increasing expectations for rate cuts, such data is highly important for market direction.
How Did the Market React?
The data coming in line with expectations was not a surprise for the markets. As a result, limited movements were observed in the dollar index initially, while partial recoveries were seen in gold and cryptocurrency markets. Expectations for rate cuts remain cautiously intact.
As core inflation in the US continues its downward trend, the possibility of a rate cut by the Fed later in the year remains on the table. However, this slow progress in the data indicates that a “cautious approach” will likely continue.
Why Is the PCE Data Important?
Core PCE is the inflation gauge that the Fed primarily uses in shaping its interest rate policies. By excluding food and energy prices, this index reflects the underlying trends in inflation. That’s why investors closely monitor this data to determine direction in the dollar, stocks, gold, and especially the cryptocurrency markets.
This content does not constitute investment advice. Markets involve high risk, and it is important to conduct your own research before making investment decisions.
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