Core PCE Higher Than Estimates, Dollar Potential for Strength
US core inflation has strengthened again. Core PCE (Personal Consumption Expenditures) rose 0.4% month-on-month (m/m), higher than the median estimate of +0.3%, according to data from the Bureau of Economic Analysis (BEA).
This figure is important because Core PCE is the inflation indicator most closely monitored by the Fed to gauge "purer" price pressures, as it excludes the volatile food and energy components.
An increase above expectations signals that inflationary pressures are not yet completely subdued. This situation has the potential to cause the market to reassess how quickly the Fed can cut interest rates.
If the market perceives a smaller or delayed chance of an interest rate cut, the impact is usually seen in a strengthening US dollar and rising bond yields, as investors adjust policy expectations.
For commodities like gold, hotter inflation data can be a double-edged sword: on the one hand, gold is often sought as a hedge, but on the other, persistently high interest rates can put pressure on non-yielding assets like gold. Following this release, market attention typically shifts to comments from Fed officials and subsequent data (such as GDP, the labor market, and subsequent inflation) to determine whether this spike is merely temporary "noise" or a sign of a strengthening inflation trend. (alg)
Source: Newsmaker.id
