US inflation expectations drop to two-week low, focus on Core PCE Price Index


US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, add to the market’s anxiety ahead of the Fed’s preferred inflation measure, namely the Core Personal Consumption Expenditures - Price Index for January.

Read: CPI vs. PCE Price Index – Which is a better measure of inflation in US?

That said, the inflation precursor dropped during the last three days to 2.41% at the latest, testing the lowest levels last seen on February 07. In doing so, the key number fades the rebound from late September levels, triggered on January 20.

The same could have been the reason behind the market’s recently softer bets on the 0.50-0.75% rate hikes during March Federal Open Market Committee (FOMC) meeting.

As per the CME FedWatch Tool, there are 78% probabilities for a 0.25-50% rate hike in March versus 22% for a 50-75 basis points (bps) of a lift to the Fed rate. The stated tool previously showed around 0.80% odds for a 0.50% rate hike in March.

It should be noted, however, that Friday’s Core PCE Price Index becomes the Fed’s preferred measure of inflation and may propel the hawkish odds should it manage to cross 4.8% YoY forecasts and 4.9% prior.

Read: The Week Ahead: US Q4 GDP, PCE, HSBC, Barclays, Lloyds, Rolls Royce results and more

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD jumps to mid-0.6500s on weaker USD

AUD/USD jumps to mid-0.6500s on weaker USD

AUD/USD touches a near two-week top during the Asian session on Monday as a sharp pullback in the US bond yields prompts some USD profit-taking. Moreover, the upbeat market mood supports the risk-sensitive Aussie amid the RBA's hawkish stance. 

AUD/USD News
USD/JPY languishes below 154.00 on USD profit-taking

USD/JPY languishes below 154.00 on USD profit-taking

USD/JPY slides back closer to last week's swing low, below the 154.00 mark during the Asian session on Monday. Retreating US bond yields drags the USD away from a two-year top high and drives flows towards the lower-yielding JPY, though the BoJ uncertainty could limit losses for the currency pair.

USD/JPY News
Gold touches near three-week high on sliding US bond yields, USD weakness

Gold touches near three-week high on sliding US bond yields, USD weakness

Gold price builds on Friday's positive move beyond the $2,700 mark and climbs to a nearly three-week high on Monday. The USD pulls back from a two-year high on the back of retreating US bond yields and benefits the commodity. 

Gold News
Elections, inflation, and the bond market

Elections, inflation, and the bond market

The Federal Reserve believes inflation is no longer a concern for consumers and the time has come to ensure the rate of change of prices does not decline any further.
Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures