What to expect in the Federal Reserve’s preferred PCE inflation report?

The Core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.4% on a monthly basis in January, at a stronger pace than the 0.2% increase recorded in December. January Core PCE is also projected to grow at an annual pace of 2.8%, compared to 2.9% in December. The headline PCE inflation is forecast to soften to 2.4% (YoY).

Previewing the PCE inflation report, “The market remains expectant about the final impact on PCE prices following hot January CPI and PPI inflation,” said Oscar Munoz, Chief US Macro Strategist at TD Securities, in a weekly report. “TD expects those robust increases to result in a solid 0.36% m/m jump for the core PCE. The PCE's supercore likely also surged but by an even stronger 0.55%.”